Community Banks: Shift to consumer lending must involve a shift in culture


Last week, BAI | Banking Strategies published an article on consumer lending (find it here) essentially stating that community banks are not well-prepared to deal with originating and, in general, dealing with consumer loans. The article suggests that community banks need to return to consumer lending. I absolutely agree. I would suggest that some credit unions also need to streamline their technology and adapt their mindset to a new way of doing business. Not all of them have received the memo that faxing paper applications to centralized lending is out. Kudos to the author of the article for developing sound reasons for the current state of affairs. In my opinion, however, there is a critical element missing.

How do we get there from here? First, we need a culture change in consumer lending.

That element is a change in culture.

Community banks, typically run by commercial bankers, subordinate consumer lending and most other activities to commercial lending. It is all about commercial. Everything, or most everything, is wrapped around that culture. It’s not a bad thing, but it does nothing to gain market share in the consumer space. If you are going to make the journey to consumer lending prominence, three key changes must be made before you contemplate the operational details described in the BAI article above. These changes are:

  1. From the board and executive management, there must be a rallying cry that commercial and consumer are equal partners in the advancement of the institution’s lending business.
  2. Management must them make the organizational and process changes to transform the battle cry into a full-fledged attack. This includes equality in terms of roles, compensation, and strategic input.
  3. Marketing who you are must change. It can no longer be a “we-do-consumer-loans-too!” approach. If consumer lending does not ascend to being a true equal in the marketing effort, staff and customers will discount the validity of the first two changes.

It’s important to state that consumer lending is not for everybody. That’s okay, too. However, if you are going to make the shift, pay consumer lending more than lip service in your culture and get down to the business of making loans.

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