In a recent lecture to MBA students, we discussed service delivery. The topic of ‘speed of service’ came up. Studies show speed of delivery is one of the major components of service perceptions. Slower = worse the rating, faster = better ratings, ceteris paribus[1]. I finished the lecture, went back to my office and called a vendor I was using on another project. He got back to me two days later by email saying he could talk next week. Oddly, I thought this was acceptable. I realized at that point; I was conditioned.
For me, moving back to Louisiana from Hong Kong was a huge adjustment in speed. Hong Kong was one of the fastest cities I’ve ever lived. Even the escalators were faster. It seemed normal to me. Prior to Asia, I worked in the casino business where our company was recognized by Forbes as the “Fastest Growing Company in North America”. We created cheeky ads with an image of a Cheetah sprinting across the plain with the copy: “This is Ted, our Accountant” or an image of the Space Shuttle blasting off with the caption: “Our Corporate Plane”. We moved fast. It was our culture and expectations. I though everyone, or every company, was the same.
Then I moved back to Louisiana to spend time with my father. I underestimated the change of pace and its effect on me. It was a downshift to say the least. Which brings me back to the MBA class conversation.
Businesses typically try to deliver their services when they promise. Many service contracts include incentives for finishing projects sooner or penalties when they go over the stated completion date. We even use the old trick of promising a specific date, knowing it is a day later than you need, then delivering it early (or giving yourself an extra day). Cue the positive feedback from the recipient of your due-date ruse. One of my star students reminded me of that one.
As consumers, we like things done on time if not sooner.
My next downshift was my introduction to the commercial capital market through my business partners. I learned there’s a whole new level of slow I never realized. I’ve seen turtle races in the Philippines that are faster than lenders are. Even to deliver a yes or no on a deal can take weeks. Then loan approval to delivery of funds takes even longer. We’re pulling out our Gregorian calendar at this point.
At Cardinal Capital, we always say we work as fast as our clients. And we let the client know that we can’t make the lender move any faster. At first, I thought this was hogwash. That can’t be the case. But sadly, it’s proven true. This industry, the commercial lending market, moves slow. We’ve been moving the same pace since the first wagon wheel factory was financed[2]. Really, I checked!
So why is this? What causes this pace? Is it because we’re being diligent and making sure everything is done properly? Is it because we have more trees to kill and create more paperwork? Or is it because we sit on deals to make our pipeline look good? It could be blamed on underwriting. After all they have increasing demands on input data to see if it fits in a credit box that keeps shrinking. God forbid something changes and they have to start from the beginning.
Where is the urgency to deploy capital and put it to work? Its 2022 and we have cars that can drive themselves. We can rent a hotel room, check in, have towels delivered, have food delivered, and check out, all from our smart phone! I can say “Hey Siri” in my house and get an answer to any question I have! You’d think our industry can catch up.
Certainly, speed of service for the commercial banking industry would be a competitive advantage. One would think!
So why are we so slow? This is a huge opportunity for smart commercial bankers and innovative fintech to provide a cost-effective tech stack that makes decisions faster! It’s a new thought I know. Change is never easy. Getting the right tech to play well with legacy systems is expensive and has an ambiguous pay off. It’s different, it takes work, and that is sometimes uncomfortable for some. Why change what’s worked since the beginning of time, right? Well, someone is going to build a better mousetrap and steal market share from those slow to react.
In the meantime, can we at least return calls quick?
Here’s to speed and innovation!
Rob Powell, Partner, Cardinal Capital
P.S. We’re available at www.cardinalcap.net, info@cardinalcap.net or 225-308-3700 if you need anything commercial capital. We’d love to hear from you.
[1] Holding other factors constant.
[2] Not true, the first loan was made in 2000 BCE in Assyria, India. Later the Roman Empire had lenders based in Temples.