Doug does an interesting job here comparing different markets, and the decision points for consumers, pointing to the commoditisation of loans.

• Lowest price

• Convenience – same side of the street

• Urgency – low fuel light came on and you pulled in to the next gas station you saw

• Loyalty – always use the same gas station

• Cleanliness – pumps and station are clean

• Hunger or Thirst – filled up and went in to the convenience store

• Speed – like the pay at the pump system at the preferred gas station

• Rewards – get rewards at the gas station used

Source: Washington Credit Union League | Focus | Features

Where his point gets interesting, lies in relativity of supply and demand.

We are in an unprecedented time where supply for loans far exceeds demand. Consumers who want to borrow money have numerous choices available to them from all sorts of companies, and not just traditional financial institutions like credit unions and banks.

Do a Google search on “loans” and do some quick browsing. It will take awhile to get through just the sponsored links.

And Doug’s final point on strategic options.

In today’s age of hyper-competition and declining net margins the status quo is no longer an option. It is time to not only differentiate your lending products and services in a new light, but also time for radical innovation in how your members borrow from you.

Relevance to Bankwatch:

Interestingly, all the attributes Doug outlined can apply to a Bank.  Certainly cleanliness may be less of an issue, but not always, based on some branches I have seen, and certainly some ATM vestibules.  I would suggest that those attributes are table stakes for participation in the market, and differentiation will have to come from elsewhere.

How can Banks break out of the status quo, and take back some of the loan market?