Sometimes we choose to delude ourselves because a delusion is more palatable than the truth. It’s not that we consciously decide to lie, we just revise our memories. In telling a story, we become more heroic and discard messy details that don’t fit the narrative.

Psychologists tell us that we resolve inner conflicts by taking positions that are more consistent with how we see ourselves. We reject the truth to protect our ego or to avoid having to act on unpleasant information. Known as the illusory truth effect, society will eventually accept a lie as truth if it is repeated often enough.

Some bankers accept untruths because they find the alternatives unpalatable. Here are a few examples:

  • “Service is our market differentiator.”
  • “We know our customers.”
  • “My bank will survive.”

To believe any of these, the banker is either ill-informed or delusional. Either way, the chief executive who believes any of the above points is putting his or her bank at risk.

In an extremely competitive environment ? where big banks are getting bigger, smaller ones are forced to merge and fintechs are stealing market share from both ? the only tactic for survival is brutal honesty. Only by critically examining the financial landscape ? consumers, competitors, products ? can we create a plan for the future

First, service is no longer a market advantage. All banks have ramped up their service game. According to the latest J.D. Power survey, the largest national institutions are almost tied with community banks for customer service. Customer service is no longer a significant differentiator. Clients have raised their expectations and expect all banks to provide excellent service and mobile convenience ? or they will switch banks.

Secondly, most banks don’t know their customers. Few banks host ongoing consumer panels, run quarterly surveys or conduct deep data dives to understand customer behavior. Most marketers don’t know why prospects gravitate to them rather than competitors down the street. Few banks segment customers by attitudes and lifestyle. Few customize products and craft individual messages to strengthen relationships and build loyalty ? steps that are ripe for fintechs to capitalize on, and that Amazon and Netflix have perfected.

And lastly, no, your bank will not survive just because you’re a believer. An honest appraisal is “probably we’ll survive, but we’re not sure.” To claim otherwise means you are either overestimating your ability, underestimating your competition or deluding yourself.

In 1990, there were 15,158 banking institutions in the United States. Today, there are only 6,419 institutions ? a 57% decline. Blame competition, excessive regulation or technology expenses, it doesn’t really matter. Either way, 8,739 banks have disappeared. And it’s not stopping there. Unless a chief executive is committed to a serious deep analysis and willingness to lead an internal cultural revolution, the outlook is grim. Rather than tackle the challenges ahead, many astute chief executives chose to cash in their stock and retire.

These are difficult issues to address, requiring exceptional managers, visionary boards and savvy marketers ? resources that are in short supply in banking. Chief executives often chose delusion over taking a deep, hard look into the future. Most are surrounded by colleagues who share their delusion and endorse their judgment. Maybe the executives are too close to retirement, or don’t have the energy or the bandwidth to tackle such monumental challenges.

But we are an industry in need of a change in thinking.

Resisting change is human nature, but sidestepping it is not an option.

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