July 31, 2021 / VOLUME NO. 168
The Existential Threat to Banking

When Bryan Jordan, CEO of First Horizon Corp. in Memphis, Tennessee, talks about strategy, two of his favorite examples illustrate the importance of adapting to change. They are Kodak and Blockbuster. 

Those companies were both right, he says. We weren’t going to stop taking pictures, and we weren’t going to stop watching movies. It’s just that we changed how we took pictures, and we changed how we watched movies. 

The devastation to those two companies can’t be overstated. Eastman Kodak Co. filed for bankruptcy in 2012, selling off patents for digital photography and online photo applications. The company still exists at a fraction of its former size and serves the commercial printing market. Blockbuster filed for bankruptcy in 2010 in the face of competition from streaming services such as Netflix. The one remaining store is a franchise location in Bend, Oregon. 

The parallel to banking is apt. 
For years, bankers have been told that banks are going away. The tech giants have played around with offering banking services for almost a decade. Amazon.com has been making loans to merchants since 2012. Facebook offers payments services. 

Challenging banking hasn’t been easy for some of these companies that boast stock market valuations any bank would envy. Facebook’s attempt to launch a cryptocurrency has floundered for years, but the company announced plans to start one this year. For now, Google’s Alphabet is partnering with banks rather than becoming a bank. The company offers Google Plex digital accounts through a variety of financial institutions, including large banks such as Citigroup and not so large ones such as Coastal Community Bank in Everett, Washington, a subsidiary of $2 billion Coastal Financial Corp. 

Banks are trying to navigate this complex environment while taking advantage of their attributes, including regulatory compliance, safety, a personal touch and trust. Some banks are choosing to provide banking services behind the scenes to tech companies, such as Coastal Financial. Others are focused on a niche where they do well, such as Los Angeles-based Preferred Bank, a perennial winner in Bank Director magazine’s Bank Performance Scorecard. [Bank Director Managing Editor Kiah Haslett profiled Preferred in the third quarter issue of Bank Director magazine.]

“Financial services aren’t going away,” Jordan said in an interview for our second quarter issue. “But we’ve got to maintain our relevance and the way we do business.”

• Naomi Snyder, editor-in-chief of Bank Director
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• Naomi Snyder, editor-in-chief of Bank Director
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