Korn Ferry Futurestep launches Credit Union and Community Banking arm

27 October 2016 Consultancy.uk

Futurestep has launched a new practice focused on the credit union and community banking sectors, in a bid to met growing demand from the industries as consumers increasingly move their money away from high street banks. To lead and expand the new practice, the firm has hired industry veterans Mike Juratovac and Mary Leonardi.

Credit unions and community banks have seen considerable uptake from people in the community, in particular among those who no longer trust their high street banks. The increase in customers is driving the institutions to recruit expertise – which includes leveraging specialist recruitment consultancy firms such as Futurestep.

In a bid to accomodate for growing demand, Korn Ferry’s Futurestep division has bundled its expertise and resources in the two sectors to launch a new 'Credit Union and Community Banking' arm. As part of the development of the new practice, the firm has hired two experts in professional search and consulting, Mike Juratovac and Mary Leonardi.

Prior to joining Korn Ferry, Mike Juratovac worked at executive search and HR research consultancy O'Rourke & Associates as its Chief Executive Officer for the firm’s Executive Search and Consulting practice for thirteen years. Previously, between 1995 and 2002, Juratovac worked at executive search firm Montgomery Resources as an Executive Recruiter. Juratovac holds a Bachelor of Arts in Business Administration and Finance & International Business from Northeastern University.

Mike Juratovac, Mary Leonardi - Korn Ferry

Prior to joining Korn Ferry, Mary Leonardi was a Director of Executive Search at O'Rourke & Associates for two years. Previously Leonardi worked at HR consultancy firm Strategic Connections as its President. Earlier roles include Vice President and Recruiting Manager/Talent Management at Security Finance from 2011 until 2012; Human Resources Manager at America's First Federal Credit Union for four and a half years from 2006; Vice President of Human Resources at 1 Vision for four and a half years; and Professional Generalist Recruiting Supervisor at Express Personnel Services, where she out started in 2000. Leonardi attended Rose State College and holds a Professional in Human Resources certificate from the HR Certification Institute.

The two veterans, Leonardi joins as a Managing Consultant and Juratovac as a Sector Leader, are tasked with the leading Futurestep’s new practice, as well as expanding its offerings to clients across the US.

Eric Goldstein, Global Market Leader of Korn Ferry Futurestep Financial Services, says, “We’re excited to bring on Mike and Mary, who both have stellar reputations as leaders and a great team in this space. We see enormous potential for this practice, as the popularity of credit unions is skyrocketing among consumers as they typically offer lower fees and better returns. Additionally, following the 2008 financial crisis, many U.S. consumers moved their savings from large banks to credit unions and community banks.”

Juratovac remarks, “As the credit union industry continues to evolve in complexity and sophistication, the need for strategically placed business partners who can provide counsel on compensation, board governance and talent acquisition has never been more important. The industry as a whole has become increasingly reliant on talent consulting services including talent acquisition, workforce planning and employee development. Korn Ferry Futurestep is uniquely positioned to help these organisations expand and become more efficient and profitable.”

Profile

×

The business and operating models of digital-only banks

04 April 2019 Consultancy.uk

In recent years, several digital-only banks have successfully managed to nestle themselves in the banking landscape, with their popularity continuing to increase. Looking at it from the customer’s point-of-view, there is little difference between these FinTech unicorns; looking at the bigger picture, however, reveals significant variation in their business models. Matyas Fekete, a consultant at KAE, explores some of the main similarities and differences in digi-bank business and operating models. 

What about the profit?

Unlike in the UK, in most of continental Europe, bank accounts and corresponding banking services are historically paid-for services. The fact that digital banks offer most of their services free of charge has undoubtedly helped them build a large customer base. On the other hand, despite comparatively low set-up and minimised operational costs compared to that of traditional banks, and given the lack of revenue stemming from the typically no-fee model, profitability has proved difficult to achieve. Monzo, for instance, recorded a net loss of £30+ per customer in its most recent financial year. 

In the start-up world, it is customary to focus on expansion rather than profit – see the case of Uber, for instance. Still, while profitability might not be their number one priority in their early stages of development, it must be a long-term goal of any business. With their ever-growing customer base, digital banks are increasingly under pressure to turn their business from loss- to profit-making. 

Credit where credit is due

Digital banks pride themselves on their fair (often meaning “free”) proposition and have so far stayed clear of offering loans (including credit cards & overdrafts), traditionally amongst the most lucrative products for traditional providers. Though somewhat reluctantly, newcomers are also realising that offering lending products is one of the most straightforward ways to offset losses made on their free, often high-cost services (e.g. overseas ATM withdrawals). Monzo, N26 and Starling have recently started offering credit products to their customers, with their loan offering expected to be extended to a wide range of services, from mortgages to overdrafts. Correspondingly, creating a lending portfolio can also pave the way for launching an interest-paying savings offering – a proposition seen as a basic banking product that is yet to feature in most digital banks’ portfolios. 

The business and operating models of digital-only banks

The premium customer

While most digital banks offer most of their products for free, some have extended their offering by paid-for premium services in order to create a revenue stream. As these premium features – including different types of insurance, unlimited free transfers/withdrawals, faster payment settlement or concierge services – are often offered in a subscription format, customers are typically prompted to pay for the full package rather than just the desired service(s), providing a significant revenue stream for the bank. Revolut, for instance, was amongst the first digital banks in Europe to break even earlier this year, a feat largely due to revenue from its premium subscription.

SMEs like digital too

Traditional banks typically service small and medium sized businesses under their retail rather than corporate banking arm. Having their product offering tested with consumers, and consequently gaining a reasonable customer base, digital banks have also identified SMEs as an ideal segment to extend their target audience to. The five FinTechs profiled have already gone, or plan to go, down this path by following up their consumer solution with a business account. While both propositions are typically built on similar features, some providers charge businesses a monthly subscription (e.g. Revolut), while others apply additional fees to specific services (e.g. TransferWise), banking on the expectation that businesses are more likely to be willing to pay for banking – something they are already used to doing. 

The marketplace model

While most digital banks offer a wide range of banking services, some of these tend to come from partnering with third-party providers. For instance, Starling Bank’s only proprietary product is its current account, which serves as a basis for the provision of ancillary services, ranging from loans to insurance, to investment opportunities. Instead of developing these services in-house, Starling enables a select group of partnering financial service providers access to its platform in exchange for a fee. In effect, Starling is using its customer base to create a market for its partners, charging a commission for each acquired customer. 

In such cases of digital banks applying this marketplace model, the majority of their income often comes from partners rather than customers. Naturally, only banks with a large enough customer base can be successful in this set-up, underlining the current intensity of competition amongst digital banks.

Banking as a Service

While customer-centricity is heralded amongst the main USPs of digital banks, some are looking beyond offering consumer-facing services to diversify their revenue streams. Starling, which is among the few digital banks built on its own proprietary platform, has recently leapt into the Banking as a Service (BaaS) industry, making its technology available to other start-ups looking to launch a digital bank. Naturally, this raises the question whether the two offerings could threaten each other’s success. Generally, as long as such partners operate in different markets, the two business lines should be able to thrive alongside each other. Further along the line, however, such partners could easily end up expanding their banking solution into the same market(s) as they aim for global success, and by doing so, becoming direct competitors. 

Different approach, same result?

It is fair to say that consumers in Europe looking to bank with a digital-only provider would have a difficult time finding relative advantages/disadvantages amongst the leading players in the industry. Still, despite the limited surface-level variety, exploring the business models of leading digital banks reveals different approaches to the challenge of making money. Alongside the more straightforward method of offering paid-for premium features/subscriptions, some are banking on the value that access to their customer base offers to third-parties, while others outsource their technology to neobanks wanting to focus on the Fin rather than the Tech. With competition amongst digital banks heating up, it will be interesting to see which business model(s) prove to be the winning formula in the long term.