We went through years of giving more media cover to the ebbs and flows of how the market was effected by small business and entrepreneurs. The tide is now going in the opposite direction.
Let's take the zoom lens of the headline writers and go behind the scenes.
Market members in the changing segments, ironically, are growing and/or merging because of totally different forces. The financial institution market has been shrinking ever since the recession hit full force. The air started leaking out of its balloon faster when the full brunt of the S&L debacle hit.
We now have fewer sellers in this market; and, for the most part they are larger. (See note later on about community banks.)
Despite analysts' fears over fewer choices for the consumer, the rules of the market will take hold.
Cutting out excessive overhead by closing additional offices will lead to a more efficiently run market. It will take awhile, but in the long run consumers will come out ahead. Right now there is no way to know how long it will take for the dust to settle.
During the time of continued media coverage over these pending mergers, and any others which pop up, there is money to be made. It will require some homework on your part. The financial analysts are not going to dig deep enough to see how efficiently these institutions are being run. This goes far deeper than the last quarter's P/E ratios. Banks which want to run more efficiently are closing branches and eliminating some tellers. In order to counteract this trimming, there are going to have launch and/or expand their online banking services and customer service 800 lines. This will require knowledgeable employees.
Online banking is not new. For those unaware, it is has been full blown and active since the early days of Prodigy (an online service). This was prior to the birthdate of the Web.
While P/E numbers tell you the outside story, a more reliable mirror is how happy the customers are. Customer satisfaction eventually changes P/E ratios. A particular touchy point currently is how much banks are charging for previously free services. Checking on fees should be on your list when doing your homework.
Laura Bell is Freelance Writer and owner of www.bellbusinessreport.com. The Bell Business Report offers common sense business advice and how-to info for running your business. It takes the everyday headlines apart, dealing with business news, and shows you how to put that information to work for you.
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