24 JANUARY / FEBRUARY 2020 In 1998, as a much younger lawyer and consultant to community banks, I prepared a presentation and subsequent article (which ran in Hoosier Banker in 2000) titled, “Community Banking in 2020.” When you are young and fearless, you can make predictions about the future, unaware that looking ahead 20-plus years in community banking is virtually impossible. This current article revisits several of those predictions, tests their accuracy and also provides some predictions for community banking in 2040. Back to the original article, in 2000 I predicted the following: Prediction 1: Community banking will be dealing with an aging, more educated population. Reality: This prediction was an easy one, simply due to the math. The emphasis, however, is that this segment of the population will be focused on retirement planning, continued work (often parttime), and Social Security and medical care. Prediction 2: The ethnicity of the population of the U.S. will change dramatically due to the rise in the Hispanic population and the impact of that population on community banking. Reality: The Hispanic population is now approximately 17% of the total U.S. population. Many banks are meeting the needs of this population in numerous ways. Although immigration is still a hot button in the United States, it is likely that this population will continue to grow in strength, both politically and financially. Prediction 3: Technology improvements will be significant. Computers will be like Timex watches. When they break, people will simply throw them away. Community banks will be fast followers in technology and, to thrive in 2020, they must adopt a “technology-touch” implementation philosophy. Reality: This prediction has proven to be pretty accurate, although it probably did not go far enough as it relates to the “hardware.” Who knew we would be banking by phone and wearing hardware on our wrists? The marriage of high-tech and high-touch has proven to be the best approach for community banks in 2020. Prediction 4: Competition for products and services will be more intense and come from a variety of sources, including credit unions, larger uninsured financial wholesalers and big banks. Reality: This is accurate, and throw in fintechs for good measure. Prediction 5: Consolidation will be over. Reality: I missed this one big time. I predicted that the system would bottom out at approximately 6,500 banks. As of this writing, we are at 5,256. Prediction 6: There will be new de novo type financial services firms competing against us. Reality: This was basically a prediction regarding the fintechs, although we did not use that term 20 years ago. This prediction turned out to be fairly accurate. Prediction 7: There will be more leisure time for the masses, resulting in a less-loyal customer base, fewer ties to the community and more customer attraction through technology. Communications will be cut to split seconds through one instrument which will serve as a phone, pager, internet connection and who knows what else? Reality: This prediction was fairly accurate, but for the reference to “pager.” Community Banking in 2020 A revisit from two decades ago FEATURE Jeffrey C. Gerrish Chairman of the Board Gerrish Smith Tuck Consultants LLC jgerrish@gerrish.com
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