Bank Consolidations - Do Consumers Win or Lose?
by Ron Samuels, CEO
Question: What does the continuing consolidation of super banks mean for consumers?
A well-known national financial services firm uses the marketing slogan: “When banks compete you win.”
It’s true. Competition in any industry can lead to better customer service, better pricing, better products and benefits for consumers. The same is true for banking.
Thirty years ago Nashville’s banking landscape looked far different than today. There were three locally owned banks that dominated the industry: First American, Third National, and Commerce Union. Long-time residents may have followed their transition over the years to become Regions, SunTrust and Bank of America. And while those three still command the majority share in this market, Nashville now has 59 banks and, according to FDIC reports, the larger banks are losing market share to smaller “community” banks.
Our region has been fertile ground for start-up banks, and they have proven to be good investments. Investors have been drawn to this market by the demographics, population growth and diversified business environment. Those same factors drew the attention of banks who wanted to enter this lucrative market, feeding a wave of mergers and acquisitions.
Consumer choice is what’s at stake with consolidation. This is why bank regulators (including the Fed and the Justice Department) can – and d0 – block mergers that would create local monopolies. This kind of regulation ensures that consumers will continue to have choices for their personal and business banking needs. And consumers’ choices create opportunities for different providers, serving different needs, to be successful.
For many consumers a large bank may best suit their needs. Larger banks can offer the convenience of more locations, and they contribute significantly to our community with investments and contributions. But, generally, larger banks charge higher fees, and a trade-off can be less personal service.
For others, choosing a smaller bank that offers more personal service and local decision making is more appealing. And they feel good supporting a locally owned business that reinvests in our community.
Developments in technology have helped to level the playing field. Smaller banks have the advantage of newer operating systems while the legacy systems of large banks and the logistics of converting systems with a merger becomes a multi-million dollar project. The convenience of online banking, electronic bill payments, and remote deposit is offered by most banks, not just a select few.
Bank consolidation has been in the forefront of the news media in the past several weeks. These acquisitions have been mind-boggling, with storied financial institutions being sold at fire sale prices. The myriad factors contributing to these emergency consolidations are very complex and unfortunately it has undermined confidence in our entire banking system. There may be continued fall-out, but consumers should know that the banking system in our country is still secure.
So, can we expect to see a new bank name and logo in our market soon? I’m not one for making predictions, but in a dynamic marketplace like Middle Tennessee, I would not bet against it. And if so, will it be a positive or negative for consumers? It’s your choice. You decide.
Posted by sdaniel on 11/03 at 07:14 AM
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