Big Auto vs. The Innovator

Yesterday Michigan Governor Rick Snyder passed Michigan House Bill 5606 (a tip of the hat to a longtime friend and fellow “car brat” who brought the story to my attention), which prevents electric car manufacturer Tesla Motors Inc. from selling vehicles in the state. Snyder, in a signing letter to the Michigan House of Representatives, says that this isn’t really news–the bill just clarifies that rather than using its own franchised network of dealerships, car manufacturers can sell through any franchise. Tesla sells directly to consumers, so sales of Tesla were always illegal in Michigan. Tesla had some damning words to say about the bill:

Not content with enshrining their ability to charge consumers dubious fees, on the last day of the legislative session, the dealers managed to make a last-minute change to the bill in an attempt to cement their broader retail monopoly. Using a procedure that prevented legislators and the public at large from knowing what was happening or allowing debate, Senator Joe Hune added new language in an attempt to lock Tesla out of the state,” Tesla said. “The dealers seek to force Tesla, a company that has never had a franchise dealership, into a body of law solely intended to govern the relationship between a manufacturer and its associated dealers. In so doing, they create an effective prohibition against Tesla opening a store in Michigan.

Either way, General Motors Co. has gone on record as a supporter of the bill, which, in the company’s view, levels the playing field by either forcing Tesla to sell through dealers or bow out of Michigan. Tesla seems committed to its direct-to-consumer strategy, so it looks like Tesla won’t be selling in the Great Lakes State any time soon.

I can’t help but draw parallels between this incident and another time that Big Auto has gone toe-to-toe against an innovator:

TuckerMoviePosterTucker: The Man and His Dream, the 1988 biographical movie, is based on the story of Preston Tucker’s attempt to change the auto industry in the 1940s. His “car of tomorrow”, the Tucker 48, featured several safety innovations, such as a shatterproof glass windshield, roll bar and seatbelts (The Tucker 48 was the first production car to include a seatbelt). In Francis Ford Coppola’s version of the story, the Big Three (Ford, GM and Chrysler) feared competition from the upstart Tucker as well as innovations like seatbelts that implied, in Detroit’s mind, that cars aren’t safe. Tucker’s dream was squashed when he and several other Tucker Corp. executives were indicted for mail fraud, conspiracy to defraud and SEC violations. They were eventually found not guilty, but Tucker Corp. fell apart and Tucker’s dream was dead.

Thinking about U.S./Big Auto vs. Tucker/Tesla brought my thoughts to all the nonbank competition out there today–and whether those nonbank competitors will remain immune from financial regulation for much longer. Of course, the picture in the bank space is significantly more complicated than in the auto industry, with big banks, community banks, credit unions, Big Tech like Google and Apple and small fintech startups all jostling for position.

And as they dig themselves further into the banking space, I think Big Tech and and the smaller fintech firms will come closer and closer to being under the thumb of the Consumer Financial Protection Bureau, an agency that enjoys freer reign than other regulators and relishes its role as the consumers’ protector. At least one law professor believes that Apple Pay already crossed the line. The more financial products and services that ‘Big Tech’ offers, the more they’ll come under the eye of Cordray. If that happens, will the CFPB mark the end of fintech innovation in the U.S.?

4Q14-Cover*If you’re interested in reading about the threat that technology companies pose to traditional banks, check out the latest issue of Bank Director magazine, featuring Jack Milligan’s cover story, “Sizing Up the Nonbank Threat”.


Where Do You Draw the Line on Data?

SharpPencils_MFIs a national conversation brewing about how companies use consumer data?

In case you missed it, on June 17 the Proceedings of the National Academy of Sciences (PNAS) published the results of a January 2012 experiment, in which Facebook Data Scientist Adam Kramer, along with Jamie Guillory of the University of California, San Francisco, and Jeff Hancock, of Cornell University, manipulated Facebook’s news feed to provide some users with content that was emotionally positive or emotionally negative to see if this resulted in a correlating reaction by the user. Kramer, in a Facebook post, clarified the research, saying, “we care about the emotional impact of Facebook and the people that use our product.

Facebook Founder and CEO Mark Zuckerberg has so far been silent on the matter, but today the Wall Street Journal reported that COO Sheryl Sandberg said:

This was part of ongoing research companies do to test different products, and that was what it was; it was poorly communicated.”

“And for that communication we apologize. We never meant to upset you.

The apology is a bit “I’m sorry if I offended you”, but if my own Facebook feed is any indicator, the social media giant will be OK. At any given moment you can read the results of my friends’ latest BuzzFeed quiz on their spirit animal or where they should go on a time machine. (Guess what? BuzzFeed is using your data too.)

I don’t know if it’s indicative of my generation–I’m firmly in the middle ground between Gen X and Gen Y–but I typically don’t get bent out of shape about how my data is used. Data is a part of my daily life, and I know the old Economics 101 credo–“There’s no such thing as a free lunch”. Facebook has to benefit from its user base. And data is really, really valuable.

But Facebook wasn’t transparent about how the data was used.

Continue reading

Following up on yesterday’s post: The Huffington Post just released results of a survey conducted with YouGov they conducted from February 7-9, 2014 to gauge American opinion on the U.S. Postal Services proposed expansion into financial services. Their survey found that:

  • Just shy of half have a favorable opinion on banks, while 74 percent have a favorable opinion on the USPS, but…
  • Seventy-nine percent of those polled are satisfied with the banking and financial services currently available to them.
  • Forty-four percent favor the USPS offering services like check cashing, bill pay and small loans (but not checking or savings accounts). That said…
  • Less than 10 percent say that they would use these services often, and one-quarter say that they would “sometimes” use these services.

You’ll find the complete results here.

Diversity of Thought

Extrovert-Introvert_o_130380I recently read Susan Cain’s Quiet: The Power of Introverts in a World That Can’t Stop Talking. I can’t recommend the book enough. Certainly it spoke to me as an introvert – it’s more typical for me to spend a Saturday night curled up with a good book – but the book also speaks on a deeper level of understanding how introverts and extroverts can differ, yet work together.

One theme I pulled from the book is that you need diversity of thought to run a successful business. Yes, you need big, vocal extroverts that can charm a crowd with their charisma and bravado. But you also need the cautious introvert quietly waving the red flag when you’re making a risky move.

American business tends to laud the extrovert: we love the brashness of mavericks like Richard Branson and Mark Cuban. However, Susan Cain, as quoted in this Time article, feels that the culture of the extrovert played into the financial crisis:

I don’t want to be too simplistic because obviously it was caused by many different factors. But I think one underappreciated role is the fact that Wall Street has such an extroverted culture and bold risk-taking. It doesn’t appeal to the type of person that is more cautious and pays attention to warning signs. What happened is that over the last few years, those types became more and more discredited because it seemed as if their warnings were false. There was one bull market after another. Even those who had doubts didn’t feel empowered to express them.

I can’t help but wonder how many introverts serve on boards – particularly risk committees – today. Yes, the world needs risk takers – but we also need those introverts quietly saying: “Hey, wait just a second. Should we take this risk?”

The Bank Director team is looking towards our biggest event of the year – Acquired or Be Acquired! Al Dominick looks into growth options for banks as we approach the event.

What do you think of GoBank?

What works – and what doesn’t – on KickStarter.


Can Big Data Go Small?

BigDataGrumpyThe term “BIG DATA” implies just that – data, and lots of it. Typically it’s thought to be held solely in the realm of large corporations – something more for Bank of America than for your local community bank.

Yesterday I attended a teleconference by Intuit, in advance of the release of their report “The New Data Democracy: How Big Data Will Revolutionize the Lives of Small Business and Consumers”, co-authored with Emergent Research. Their premise is that “Big Data” isn’t just for big business, and technology has created a data democracy that will level the playing field for small business.

Intuit predicts that small businesses will have fully embraced data on the cloud by 2020, using products already available like Amazon Web Services and Intuit’s QuickBooks Online, whose “Trending” feature anonymously aggregates customer data so small business can compare themselves to other, similar businesses across the country.

Another key takeaway? All this technology means that the customer is more empowered than ever before. Via social media, consumers literally have access to the data they need at their fingertips – for everything from finding the best deal on a coffee pot to finding the most-trusted bank for their financial needs.

Pretty cool – the Intuit Loan Finder matches small businesses to banks.

As someone that strives to live a healthy lifestyle, I love this unique banking idea.

More bank M&A? Legal experts think we’ll see a slight bump in 2013.

Be Prepared to Go Back to Basics

Sandy has devastated the East Coast – and with a Nor’easter hitting the affected areas yet again, times are tough for the people of these areas. Sections of New York and New Jersey were reduced to cash economies, and with cell service impaired, mobile wallets and mobile banking became useless. Robert Werner, COO of Two River Community Bank, informed Fox News that the bank was doing business the ‘old-school’ way – with ledgers and written records.

Sandy serves as a stark reminder to us that – despite the rise of technology, the demand for it, and the conveniences it provides – when disaster strikes, banks need to be prepared to go back to basics. Disaster can strike at any time. When Nashville was hit by devastating floods just a few years ago, no one anticipated the amount of damage and heartache it would cause (you don’t call it a thousand-year flood for nothing). You can’t predict when a tornado will touch down in the Midwest, or an earthquake will shake California. Is your bank prepared to serve your customers through a disaster? Do you have a plan?

Banks in the Northeast: How did your bank fare through Sandy? Is the Nor’easter further complicating recovery? Comment below, or contact me at emccormick[at]

Does Your Bank ‘Walk the Walk’ on Diversity?

“It would be better as a matter of diversity and overall effectiveness of boards if we can get more qualified women onto boards of banks.”  —  Michael Rake, deputy chairman of Barclays Plc

Many agree that diverse leadership results in smarter, more thorough decisions, as a diversity of experiences and backgrounds puts a “bigger brain” overseeing a company. But for all the “talk”, many companies – banks included – are not walking the walk.

Sallie Krawcheck, formerly of Bank of America, opined in the Washington Post that women could actually save banking as women are “more risk-averse” and more focused on long-term goals than their male counterparts. And research conducted by Citigroup found that boards with female board members saw a 11.1% higher return on equity.

Either self- or externally-imposed (or a mix of both), the glass ceiling still exists. The 30 Percent Coalition set a goal of women holding 30% of board seats across public companies by the end of 2015 – a lofty goal, as women currently hold half that number today. Yet women as a whole are largely opposed to quotas – perhaps seeking to fill board seats on their own merits. So how to create change? ION, in a recent report, encourages directors to reflect and speak out about board composition, and request of search firms that women appear more prevalently on prospective lists of directors. If you follow Isabella Bank’s model of succession, creating a “virtual bench” within your bank for executive succession, you have the potential to create a diverse model from the ground up, grooming women and men from within for a long-term future with your bank.

And we haven’t even touched on ethnic diversity. In addition to being largely male, major bank boards remain overwhelmingly white.

When it comes to diversity, does your bank talk the talk – or walk the walk?

More diverse thoughts:

  • Are you a woman interested in joining a board, or a board looking for female leadership? ION and Women in the Boardroom are two good resources.
  • The recent issue of ABA Banking Journal contains advice for young women in banking from female CEOs.