I read with interest the other day an article that claimed General Motors is awaiting approval to open its own bank. To be honest, my first reaction was one of fright. Don't get me wrong, I'm actually a loyal GM customer, but I don't know if I want my savings account guaranteed for three years or 30,000 miles-whichever comes first.
Seriously, if GM does get approved, it will join a growing group of non-financial businesses opening banks, a list that includes BMW, Nordstrom, and DePaul University. Blame Gramm-Leach-Bliley and the Internet for their sudden interest in the financial space; the former made it legal for them to open banks, the later has made it inexpensive.
And for the most part, this influx of banks from non-financial companies has occurred with nary a peep from traditional banking circles. Established banks and supporting trade organizations keep the topic on the back burner, not much of a surprise considering these new banks could be a threat to the old order. Vendors who have supplied the newcomers with the systems to make banking possible have also been mum, probably to avoid angering long-time bank clients.
I suppose another reason for this reticence is that many in the banking community don't currently see these newcomers as much of a threat. After all, just how does Nordstrom sell a banking product? (Mr. Doocey, you seem to have put on some weight around the middle. I think you will be more comfortable with a 44 long and a 30-year CD.) How about a college? (Well Paul, we'd like to give you your interest, but there's the small matter of missing math credits and overdue library books.)
Then there's the rumor that some fast food concerns may open their own banks. Can you imagine the banking services at the United Bank of McDonalds? (I'll have the Big Mac, fries, a home improvement loan and $100 worth of quarters. And could you supersize that for me?) How about Burger King National, where special order won't upset them? (I'll take the checking account, but hold the mustard, pickles and ATM withdrawal fees.)
All kidding aside, it will be a tough road for some of these non-traditional banks, as evidenced by J.C. Penney, which started and then abandoned its own credit card service. Others, however, pose a very real threat to banks, especially if they can tap into the marketing power of their well-known and trusted brand names.
The solution? There's an old saying that goes, "keep your friends close, but your enemies closer." Now is the time for the traditional banking community to embrace the non-financial newcomers, and find ways to work together that will be mutually beneficial. Otherwise, one day you may find customers lining up for a Coke and a mortgage.