Again and again, I’ve heard very smart bankers repeat three lies to one another. Now, I don’t think they’re “liars.” But I do think they’ve lost their grip on the truth. So, today, right here, I’m going to expose all three lies and “debunk” each and every one, so that you, dear reader, can inoculate yourself from them before you, too, are infected.
“Banking has become a commodity.” And its sinister sidekick “The only thing customers care about is price.”
Lies, lies, lies!
Yes, banking (and every other industry on the planet) has become commoditized. The great abundance and interconnectivity that globalization has given us over the last 30 years did come with some strings attached and competition and commoditization are the biggest two.
And, if you try to operate in this new commoditized world, where the consumer has infinite choice in banks and easy access to information to compare one bank to another, in the very same way you operated in the pre-globalized world, well…
So here’s the “lie” that bankers tell…yes the industry is commoditized. But you, and your bank, can choose to participate in the commoditized banking industry, or not.
And the highest-performing banks know this. They’ve eliminated all or virtually all competition within their markets and for their best customers.
They’ve carved out for themselves a category of ONE, and dominated it. How?
With deep understanding of what the best A+ credits value (what they’ll pay a premium for) and giving it to them (more specifics on how to figure that out in a moment).
Today, we’re left with nothing but bad choices. If we want loan growth, we have to buy it with deep discounting. If we want fat margins, we’ll have to take on the riskiest customers to get them. There aren’t any easy ways to grow, so pick your poison.
If you’re mired in cut-throat competition in your market, especially if you’ve been kicked in the teeth on every deal, forced to take rates you don’t like, just to “win the business,” I can understand why you might think this IS reality.
Just as earlier navigators believed the Earth is flat, you may perceive and believe a reality that does not exist. Your belief, like those old navigators’ is reinforced by your ears…your peers, your sales people, the industry media…are all screaming in your ear, “You’ve got to discount until it hurts to ‘win the business,’ if you want to grow” (the world is flat).
They’ll persist, “You’ll never sell good credits at premium prices—they’ll just go down the street. The only way to get a premium rate is to settle for risky deals that have fewer options” (the world is flat).
It IS possible, in fact it’s formula and system, to achieve rapid loan growth and grow net interest margin AT THE SAME TIME and do it while working exclusively with the best A+ quality credits in your market. It is possible…I’ve seen it happen hundreds of times now, in good economies and bad. In big banks and small. In urban markets and rural. Against “big bank” competition and in markets without the big name banks.
For those struggling to fight through a world dominated by Lie #1 and #2, the “cure” most banks seek out is sales training. As if it is a penicillin to eradicate all sales problems. But the problem isn’t a sales training problem.
That’s not why your lenders are afraid to call on the marquis customers in your market—the ones you REALLY want in your bank, who’ll pay for value, who will bring with them more marquis customers…
That’s not why your people sit in the office fiddling with busy work, waiting for the next deal to walk in the door, instead of getting out and hunting.
That’s not why your lenders are better at selling you on the need to take a deal at a rate you don’t like than they are at selling the customer on the added value you bring to the deal (and why paying a higher rate for the added value is actually the best deal for them).
The fact is that, when I speak to a group of bank CEOs and ask who’s done sales training…and who’s happy with the results, not one hand goes up. Ever. Sales training is a Band-Aid-over-cancer approach. You don’t have a sales training problem – you have a confidence problem. Until you stop telling the lie and deal with the real problem, the problem will persist.
Now you know the lies. Next, you need to know the solutions.