A sleek and modern look, such as this one at Triumph Bank’s Germantown branch, reflects changes in the business. New technology and the evolving needs of customers are prompting banks to adapt to changing expectations.
If the Triumph Bank branch at 7550 West Farmington Boulevard is anything to go by, with its eye-catching 4-by-7-foot video wall and the hip-looking pods scattered throughout in lieu of a traditional “teller row,” the future of the banking industry is well underway.
It’s no secret that banks are dealing with the same fundamental problem right now as many of their peers in industries that range from media to retail. Customers are loath to have to visit a physical location these days if they can help it. Whether ordering a new pair of jeans, buying a book, or completing simple financial transactions, they want to do as much as possible online and at their convenience. As for banking in particular, there are a number of other expectations nested like Russian dolls inside of that overarching desire for convenience. Fees, for example, should be kept to a minimum, if they even have to exist at all. And online services need to be mobile and smartphone friendly. It’s standard operating procedure for every major bank in Memphis, if not beyond — which brings us to Triumph Bank, and its sleek, ultra-modern branch in Germantown.
If bank customers are doing as much as possible online, what does that mean for the nagging legacy problem of, you know, actual bricks and mortar? Because customers may want to do most things online — but not everything. Imagine, for example, that you open up your banking app only to be greeted with the shock of seeing a negative balance in your checking account, which you know for certain to be in error. You won’t simply dash off an inquiring email. You will very likely stop what you’re doing and head to the nearest bank branch to demand an explanation without even giving the act of doing so a second thought.
So banks feel compelled to offer the old and the new. Which is why the Triumph Germantown branch is so fascinating, because it suggests that when it comes to the future of banking in Memphis, banks will increasingly look like — well, perhaps not like a bank at all.
It’s a compelling transformation to watch, because it’s something like the one newspapers are trying to pull off — many of which have given up on the “paper” part of their identity entirely and shifted completely to becoming quasi-digital enterprises. That’s a good starting point to understand what’s going on in today’s banking world, where you can walk into a number of branches around Memphis and be greeted by sights that include decidedly modern touches. Such as “universal bankers,” which are basically jack-of-all-trade, concierge-like employees like the gentleman seated at one of the Triumph Bank pods who rose to greet this writer on a recent afternoon. He was ready to handle almost any task that needed to be done; otherwise he could hand it off to a colleague. It almost makes you forget you’re in a bank. It’s certainly not the classic bank of your parents with a stuffy old teller row and a line of employees sitting behind it with lines of customers waiting their turns.
Triumph Bank President and CEO William “Will” Chase
Triumph CEO Will Chase was especially pleased when that branch first opened a few years ago, and his 20-something daughter checked it out. She raved about the sight that greeted her when she stopped by. It was, he recalled her proudly declaring, “one of the coolest things she’d ever seen.”
A space like this one, Chase explains, helps Triumph better focus on the bread and butter of banking as the world continues to change. “I always go back to what I keep saying and have said for years — when you go hunting, the job of the dog is to find the birds,” Chase tells Inside Memphis Business. “You don’t give them a gun. And so, the idea that you’re going to have these massive technology platforms that will be all things to all customers — I don’t think that’s really going to be the case in banking.”
In a way, banking is actually one of the easiest industries to understand. To oversimplify, the trick (if you’re a bank executive) is to earn more in fees and the like, compared to the interest you have to pay out to customers in exchange for their deposits.
The industry’s players range from small community banks, like Triumph, which might have only a handful of branches in Memphis (and perhaps beyond) and which rely on loyal customers and a hyper-focus on niche businesses and products to amplify their basic banking services. At the higher end of the scale are regional players like the Memphis-based bank that most of us still call First Tennessee, although last year it changed its name to be in line with that of its parent entity, First Horizon.
“The idea that you’re going to have these massive technology platforms that will be all things to all customers — I don’t think that’s really going to be the case in banking.” — Will Chase, CEO of Triumph Bank
Then you have megabanks like Bank of America which have offices and branch locations and conduct a variety of business in Memphis — but are based elsewhere. Executives from banking institutions like those — including BofA, Regions Bank and SunTrust — have all insisted to this writer before, with slight variations in the wording, that the mantra by which they operate is to bring big-bank resources to bear on local decision-making.
But our focus in this story is to provide a roadmap guide to the Memphis banking market, which is quite idiosyncratic, with some caveats that need to be stipulated right from the outset.
The Federal Deposit Insurance Corp. is the federal agency that guarantees the money you’ve deposited in your local bank, up to a standard limit per depositor of $250,000. Once a year, it produces a snapshot report detailing the market share of all the banks in every community (based on how much money customers have deposited with them), and while not definitive about the health of a market, it’s always a good place to start when analyzing a community’s banks. That report is posted on the FDIC’s website around October every year and includes data that’s current as of June 30th every year, and what the most recent report shows is the following:
Almost 58 percent of the $31.8 billion in customer deposits in the Memphis MSA (the metropolitan statistical area that includes 10 counties in three states) is held by just four banks, only one of which (First Horizon) is local. The other three are Regions, SunTrust, and BofA, in that descending order — with First Horizon at the top as the biggest bank locally based on customer deposits.
What the FDIC’s report shows is that every bank in the Memphis area which is not one of those four is competing for the single-digit percentages of market share that are left over. And this report doesn’t change too terribly much, in terms of the ranking, from one year to the next. There’s not a lot of organic growth happening in the market. What growth that does exist, banks are taking from each other, so that two banks with an 8 percent and 6 percent market share might change to 9 percent and 5 percent, respectively, the following year. In effect, it means competition among local banks amounts to what one executive told this writer is a kind of “guerrilla war,” all of them nipping constantly at each others’ heels.
Which should provide some helpful context when you see Triumph open a branch like the one it’s got on Farmington. And note that plenty of others are trying this same tactic, Regions being a good example. Regions opened a new Lakeland branch in 2018 near Canada Road and U.S. 64 that looks more like an Apple store than a bank branch. It’s got an airy, open, sleek design with a large amount of glass on the exterior, and expensive-looking furniture and video screens throughout inside, along with Regions’ Video Banking ATMs.
The latter are ATMs fitted out with a two-way video component, so that you can walk up and interact with a teller on the other side of the screen during daytime.
First Horizon CEO Bryan Jordan
When you talk to the chief executive of the biggest bank based in Memphis, meanwhile, technology is, no surprise, top of mind for CEO Bryan Jordan as well. To that end, last year saw considerable growth as well as the brand change from First Tennessee to First Horizon that reflects its presence beyond the Volunteer State.
In November, First Horizon announced a merger with Louisiana-based Iberiabank with First Horizon keeping its name and head office of the combined entity in Memphis. Thanks to the customer deposits and other assets of Iberiabank, this deal will boost First Horizon’s size from $41 billion in assets to about $71 billion — and Jordan’s bank hasn’t stopped its recent growth ambitions there. Also in November, First Horizon announced a deal to acquire 30 SunTrust bank branches as a result of the latter’s merger with BB&T Bank, which included the need to divest a certain number of branches.
“As far as SunTrust goes, we’ve made the application to the Federal Reserve on the SunTrust branches and we’re working on the conversion planning,” Jordan says. “That in all likelihood is going to happen in the April-May time frame. The process with Iberiabank is still contingent on regulator and shareholder approvals. We expect all of that to occur sometime in the second quarter, so that process will take a little bit more time — but we’re doing as much high-level planning and systems decision discussion as we can.”
A bank can’t really build a sustainable competitive advantage in technology. Mostly because that’s the kind of thing that’s easily replicated in a commodity-based world. The trick is to use technology to help acquire and retain customers.
Other recent changes at First Horizon include new consumer checking products announced in December that allow the ability to choose a savings account at no extra charge along with each product. Other benefits include premium interest on checking balances, and additional bonus interest to encourage the customer’s longevity with the bank.
When the First Horizon-Iberiabank merger was announced, Iberiabank president and CEO Daryl Byrd said it would allow both companies the opportunity to expand their capacity to lend money, in addition to invest in advanced financial services technology — something that Jordan expounded on in an interview with Inside Memphis Business.
“There’s a tremendous amount of change going on in terms of customers’ expectations in how they want to bank and we need to be responsive to that,” Jordan says, adding, somewhat counterintuitively, that when it comes to technology, “I would stipulate that nobody can really win a spending race. What this merger allows us to do is to capitalize on scale to expand or broaden the playing field from a technology perspective. The way it’s easiest for me to think about it is, to the extent a [company like] Venmo or Square changes something in payments — whether the payment is business to business or business to person or person to person — and we have to go out and change our online banking site and Iberiabank has to do the same thing, we’d each spend $3 million to $5 million to get that done.”
“Tech is a part of it. I wouldn’t discount it, but I think by far the thing that differentiates us is the ability to take the tools of technology — to take product functions and features and package that in a way that is valuable and builds a relationship.” — Bryan Jordan, CEO of First Horizon
Together, though, Jordan says the combined entity would still pay $3 million to $5 million to make changes to its own systems and technologies in response to broader trends, but it can then use the $3 million to $5 million that the other company would have spent pre-merger and “expand or broaden the playing field, from a technology perspective.”
What he’s essentially saying is a bank can’t really build a sustainable competitive advantage in technology. Mostly because that’s the kind of thing that’s easily replicated in a commodity-based world. The trick is to use technology to help acquire and retain customers. It’s unlikely a customer would leave a bank that offers an array of technology options to facilitate a consumer’s banking needs, plus a robust branch network with an inviting customer experience inside, for a small bank that might only have one or two of those conveniences.
“Tech is a part of it. I wouldn’t discount it, but I think by far the thing that differentiates us is the ability to take the tools of technology — to take product functions and features and package that in a way that is valuable and builds a relationship,” Jordan says. “Our people differentiate us, because they take the technology and products and services, and they use that to build broad, deep relationships with their customers that are enduring through the years.”
Memphis banks, in other words, find themselves at the dawn of a new decade in much the same place they were in at the conclusion of the one that just ended. The basics are still the same — acquire customers, entice them to park deposits with you, extend loans to other customers, make money from everyone through fees and other costs. It’s just that the stakes keep getting higher. Perks like technology services and features, as well as the creature comforts of the in-branch experience, provide a bit of a shortcut in terms of acquiring and retaining customers. Beyond that, banks have to run a ground game that never ends, encompassing everything from making sure customers have as friction-free of an experience as possible to keeping the products and offerings in a bank’s menu from getting too stale.
There is a hope that the economy will remain relatively solid, providing banks in Memphis and beyond with customers who have correspondingly decent personal balance sheets.
“I think loan and deposit growth and customer activity will continue to be good in 2020,” Jordan says. “And I see no reason why it shouldn’t continue to be strong as we go into 2021. Consumers are in a place where they have better balance sheets, they have growing earnings, unemployment is down, and employment is up. When you have the consumer in a strong position, that drives 70 percent of your economy, and you’re generally going to do pretty well.”
