The Bold War

Too Big to Fail, Too Big to Move

Have you noticed how the big banks seem to spend more time dealing with their own problems, than sorting out those of their customers? Size, scale and reach – once a competitive advantage in banking – has now become a major hindrance to delivering quality customer service.  Over the last decade the US banking industry has been committed to expansion at the expense of better technology and infrastructure.  In the meantime more nimble competitors such as Umpqua and US Bank have emerged and they are changing the landscape forever.  Banks that were too big to fail are now too big to move and something needs to be done.

To be blunt the banking industry has suffered from an addiction to ‘short-termism’.  Boards and investors focused on expansion and profits ahead of building for the future.  Growth became king and technology budgets were cut.  Manual processes, band-aid solutions and corner cutting were frequent and this resulted in an unsustainable operating model.  Due to this the major US banks can no longer keep pace with the changing needs of their customers.  They have become another manifestation of the ‘standing still is moving backwards’ proverb that resulted in the demise of both Kodak and Blockbuster.

A key indicator that the US banks have got it wrong is the sheer number of employees they have.  The five major US banks have over 1 million workers between them.   In comparison the top five US Tech firms have fewer than 200,000 staff (Figure 1).  Sure most of the Tech firms don’t have retail stores like a branch but even if they did they would still not be in the same ball park.  Where the major Tech businesses have focused on lean processes and technology to improving performance, banks have focused on more people.  More importantly all of these Tech firms are beating the banks at their own game – making money.


Figure 1 - Number of employees at Top 5  US Technology Companies and Banks in 2011



1. Microsoft 89,000
2. Apple 49,400
3. Google 24,400
4. eBay 17,700
5. Facebook 3,600 


1. Bank of America Corporation 288,122
2. Wells Fargo 272,200
3. Citigroup 260,000
4. JP Morgan Chase 239,831
5. US Bank 60,584

In comparison, Umpqua bank, which only operates in three regions and has fewer than 4,000 employees, has embraced agility and innovation to redefine its branch channel.  Umpqua has designed its branches to be a communications channel rather than a transaction channel.  This allows it to provide a unique customer experience with a smaller number of ‘in store’ assistants.  The smart design also allows branches to be built in 45 days compared to the industry average of 120.  Umpqua realised it couldn’t compete on size and scale and instead focused on speed and innovation.

US bank, at only 60,000 employees, has pioneered a number of payment and loyalty products over the last two years.  The bank has initiated a group wide strategy to explore new technology.  Last year the bank released a first of its kind ‘tap and go’ wristband with Mastercard that utilised a secure payment chip.  In October they partnered with retailer REI to deliver an instant in-store credit card approval process.  All customers had to do was download a mobile app, apply and see if they were accepted.  REI was able to increase the number of credit cards issued, and shoppers benefited from being able to use rewards instantly in store. 

So why have Umpqua and US bank been able to succeed where others have failed?  Both banks have used the constraints of their employee base as a mechanism to drive a culture of innovation and communication.  Keeping employee numbers low has provided greater control over company ethos and culture.  Umpqua consistently ranks in the top 25 places to work in the US on the back of its ‘Connect’ employee program.  US bank has also received plenty of plaudits for its innovation training program.  To make it easy for staff to engage, share ideas and develop relevant networks they have both implemented their own social network for staff.

Over the next couple of years the big four banks will need to significantly alter the way they allocate their budgets.  Changes are required for two reasons.  With branch transactions in serious decline the amount of money allocated to this channel has become lopsided.  It has also become apparent that employees don’t have the tools to collaborate and communicate seamlessly across regions and functions.  It has become too difficult to manage and it is impacting efficiency and productivity.  With time-to-market such an important consideration banks can no longer afford to expect their staff to work their way around it.

It is imperative that banks make the move now to stop their underlying weight problems.  For years efforts were focused on growth at the expense of efficiency.  This only ended up exasperating the efficiency problems most banks already had.  The gap in the speed of new competitors and the big banks has only grown as banks become slower and new entrants get faster.  Banks have grown out of control and are now too big to move.  They are inefficient, unyielding and slow and they need to make drastic changes now.  It’s time for banks to invest in speed and new technology before deciding where to move next.


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