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The future of banking

What is the biggest issue facing the banking industry today?

David Kohl, Contributing Writer, Corn+Soybean Digest

September 17, 2019

3 Min Read
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Many of this column’s readers hold leadership roles in their communities by serving as board members or advisors to banks, farm organizations, or local service groups. The strength of a rural community is often only as good as the bank or lending organization that is its anchor. Where is the banking industry going? What are the strategic issues and what makes you as a banker passionate about your job? The senior-level class at the Graduate School of Banking provided some insight into these questions. The use of anonymous clicker response technology assisted in enumerating the results.

Currently, there are about 4,700 banks in the United States, down from approximately 15,000 banks decades ago. How many banks will remain by the year 2030? Over half of the class of bankers at the school indicated that there would be 3,000 to 4,000 banks in 2030. Another quarter of the class checked the box indicating less than 3,000 banks. Twenty percent of the students stated that the number of banks would remain the status quo between 4,000 and 5,000 banks.

What is driving consolidation in the banking industry? Banking regulation and compliance is a fixed cost and has increased significantly in the past decade. By increasing bank size, there is lower fixed cost per unit and, in recent years, some regulatory relief has been observed. Many rural banks are family-owned and the next generation often does not have the desire to continue in the profession. Of course, technology and mobile banking have impacted bank numbers along with declining population demographics in rural areas.

What is the biggest issue facing the banking industry today? Attracting and retaining talent was listed by the class as the number one issue. This was followed by cybersecurity and technology capabilities. Next, the class listed other banks and non-bank competitors as an issue facing the industry. The local and regional economies appear to be a challenge, particularly for those banks located in an agriculture-oriented rural area.

What makes the banker you work with passionate about their job? The largest responses were in the areas of making a difference in the community and in the lives of other people. Many lenders that I work with enjoy working with customers, knowing the family, and being involved with the community. In agricultural lending, relationship lending still counts and you are more than a number, particularly in rural areas.

Another critical aspect of maintaining a passion for agricultural lending was a challenging and stimulating work environment. This appears to be particularly true for the new generation of bankers represented by the millennials and Generation Z. Of course, salary and benefits, followed by opportunities for advancement, were neck and neck when tallying the results. The work culture was also listed as an important attribute. Sometimes work culture is an underappreciated aspect of any work environment whether it is a bank, agribusiness, or corporate business. What were not mentioned as important in the survey were technology and the work location of the bank or town.

If you analyze the results, they parallel the changes that are occurring in farm and ranch businesses. It will be interesting to see what the year 2030 will bring for agriculture, farm businesses, and banking businesses.

The opinions of Dr. David Kohl are not necessarily those of Corn and Soybean Digest or Farm Progress.

The source is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.

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About the Author(s)

David Kohl

Contributing Writer, Corn+Soybean Digest

Dr. Dave Kohl is an academic Hall of Famer in the College of Agriculture at Virginia Tech, Blacksburg, Va. Dr. Kohl has keen insight into the agriculture industry gained through extensive travel, research, and involvement in ag businesses. He has traveled over 10 million miles; conducted more than 7,000 presentations; and published more than 2,500 articles in his career. Dr. Kohl’s wisdom and engagement with all levels of the industry provide a unique perspective into future trends.

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