When a young Randy Dennis entered the banking profession decades ago, he was told things were about to rapidly change in that industry. A new invention – the ATM – was going to put brick-and-mortar banks out of business, a man told Dennis.
It may take five years, the man continued, but it would happen. It’s been more than 40 years and there are still plenty of brick-and-mortar banks, but the banking industry is ever-changing and hard to predict, Dennis said during his keynote address at the Arkansas Small Business and Technology Development Center’s 6th annual Lenders Conference, held Tuesday (April 30) on the Arkansas State University campus in Jonesboro.
“People still like to go into buildings to do their banking,” he said to the crowd of more than 50 representing banks and lending institutions from around Jonesboro.
Dennis, president of DD&F Consulting Group, said the economy has recovered from the Great Recession and that is proved by the interest rate hikes in 2016-18. The world economy has slowed in recent months and that is of some concern to economists, he added.
There are conditions in place now that led to the Great Recession, he said. Rapid loan growth, high concentrations on commercial deposits, insufficient capital, and large numbers of new and untested banks were among the factors that led to the worst economic downturn since the Great Depression in the 1930s. When he rhetorically asked the crowd if some or all of these conditions were in place now, many nodded in agreement.
The economy has been strong in recent years and that is shown through the fact that in 2018 no banks failed and none are projected to in 2019, he said. At least eight banks failed in 2017, and another five failed the previous year. There are no new state or federal regulations on the horizon, but it’s in these times of vibrant growth that fraud typically flourishes as well, and it’s only when the economy turns that these schemes seem to be exposed, he said.
Understanding that seismic shifts are a certainty in any major industry is a key to understanding how to navigate them, Dennis said. For instance, at one time Sears was the largest retailer in the world. People bought everything from Sears – clothes, dishes, bedding, tools, car motors, and everything in between. That has been replaced by Walmart and Amazon. Sears is now an afterthought when it comes to major retail, he noted.
Predicting banking’s future may be difficult, but there are a few givens, according to Dennis. Lending will still be a major driving force for banks and the most successful institutions will have a strategic plan to deal with adverse economic times. Continuous acquisitions will continue, meaning Arkansas will likely have less than the 91 banks it currently has in the state.
Bank owners tend to have older owners and boards and infusing those ranks with younger leaders will help banks adjust in the coming years, he said. There has been a trend in recent years for banks to become more regional and that will probably continue too, he added.
Dennis didn’t know exactly what changes the industry will undergo in the coming years and decades. But, he knows one thing for sure: it won’t be the same.
“Banks will be different,” he added.