Credit Union responding: In recent years, for some CEOs, the letter to shareholders that accompanies Annual Reports has become a “bully pulpit.”  In those letters, they not only talk about the specifics of their companies but share their vision of what is most salient in their industry today.

We read this year’s letter by Jamie Dimon, JPMorgan Chase Chairman, and CEO with that lens in mind.  In section III, he writes about the strength from which banks compete and the challenges ahead. He also indicates that challenges will go beyond the regulatory burdens CXOs sometimes decry.  It reads:

“It is completely clear that, increasingly, many banking products, such as payments and certain forms of deposits among others, are moving out of the banking system. In addition, lending in many forms … is moving out of the banking system. Neobanks and nonbanks are gaining a share in consumer accounts, which effectively hold cash-like deposits. Payments are also moving out of the banking system, in merchant processing and debit or alternative payment systems.”

He goes on to spotlight the key disruptors “…Big Tech (Amazon, Apple, Facebook, Google – and, as I said, now I’d include Walmart) is here, too. Their strengths are extraordinary, with ubiquitous platforms and endless data.”

If you are a CXO at a Credit Union/Community Bank, why should you care about what a Big Bank CEO says?

You should care because if a banking giant is warning that competition is not necessarily fair and is gunning for them, imagine what you can expect in your market. I find it particularly significant that he reinforces that NonBanks and NeoBanks’ advantage rest to some extent in their paying a lot more attention to all the data that their customers generate. He’s not just talking about “Big Data”; the advantage comes from what they do with the data they have.  In other words, their ability to understand member behavior and changes in preferences and the speed with which they react to it.

And yes, we can talk about the e-products launched by some of the players, but what about Walmart.  With over 4,700 US stores, chances are your members/customers are also their clients.  And those members/customers likely visit their stores with some regularity.  Walmart has now partnered with Ribbit Capital (the investment firm behind Robinhood, Credit Karma & Affirm) to create its own “fintech startup” and offer banking services.

It begs the question, what are you doing to strengthen your value proposition and remain relevant?

Let’s take an example from Mr. Dimon’s plan of action.  Among other initiatives, he sees JPMC addressing these challenges by investing in strengthening their capacity to glean insight from the data they already have.  That is a strategy we have advocated for years.  As a CEO or CFO, you need to have complete clarity on your funding’s stability and new money sources for your organization. If you are not doing it to promote organic growth, you likely should do it to preserve your institution’s stability or achieve the most extensive valuation possible in the wave of consolidation that is likely to happen soon.

As a CMO/COO, you need to promptly understand changes in members’/customers’ preferences and maintain a clear understanding of the variances in performance inside your branch network, customer segments, and other business dimensions. Your plans need to be routinely and systematically based on data, not just your experience and subjectivity.

In summary:

You know that Big Banks are paying attention to the relentless rise of NeoBanks and NonBanks; you may even be partnering with FinTechs for some activities.  And your disruption can be game-changing – in only 10-years (2000 and 2009), record labels saw their revenues slashed by almost 50%.  They discounted the threat of music streaming and paid dearly for it. Your success in the next few years will depend a lot on how you choose to respond to the changing landscape.  We will leave you with some questions to consider:

• What are you doing to create a wall around your existing members/customers? Or at least around the profitable relationships from those segments that overlap with the Walmart customer base.
• Today, how do you measure Members Behavior, and how is that knowledge incorporated into the actions you take this month, this quarter?

Sometimes it takes a village, so count on us to help you with these and other challenges that require understanding how your business is affected when customers make financial decisions to meet their changing needs.  Our behavior analytics solution works harder than six analysts and cost less than one. Your data should be working as hard as you do to drive success. Press here to start a conversation with me!