For Financial Institutions

Financial Literacy Month: How are you celebrating?

March 22, 2013 By Banking.com Staff Leave a Comment

With April approaching, it’s almost time to kick off Financial Literacy Month! Strongly supported by the United States Congress and the Financial Literacy and Education Commission, Financial Literacy Month aims to promote the importance of making informed financial decisions on a national level. For nearly a decade, the country’s financial institutions and other non-profit financial organizations have used the month of April to educate Americans about their personal finances.

Notably, non-profit organizations such as the National Foundation for Credit Counseling (NFCC) and the Jump$tart Coalition for Personal Financial Literacy have emerged as leading promoters of Financial Literacy Month through their financial awareness efforts. Each April, the NFCC releases an annual Financial Literacy Survey which provides data on Americans’ attitudes and behaviors towards personal finance. Additionally, for the last 10 years, Jump$tart Coalition for Personal Financial Literacy has been using the month of April to host Financial Literacy Day which features an open-house exhibition of financial literacy products, programs and initiatives.

Financial institutions nationwide also play a pivotal role in celebrating Financial Literacy Month. In 2012, Philadelphia Federal Credit Union released its first annual Financial Literacy Survey, which provided insights into saving practices, spending habits and financial attitudes among Philadelphia-area residents.

With the 2013 Financial Literacy Month just around the corner, what types of programs does your financial institution have in place to promote financial literacy? Whether it is a survey, contest, or just spreading overall awareness of personal finances, Banking.com wants to know! Throughout the month of April we will be featuring FI’s and their efforts to promote financial literacy. Fill out our FI Spotlight form to be featured on a Banking.com Financial Literacy Month post!

Three Ways Banks can Support Innovation in Their Markets

February 19, 2013 By Jeffrey Marsico Leave a Comment

Why did Willie Sutton, famous bank robber from the 1920′s to 1950′s, rob banks? “Because that’s where the money is.” Sutton, by the way, denied the quote. But we can’t deny it’s true. Financial institutions remain the place to go for money.

So why do FIs opt for the sideline in participating more fully in innovation? I recently wrote on these pages that FIs should develop Shark Tank like processes to get early stage equity capital into the hands of nearby entrepreneurs to fuel growth in local markets.

But bankers generally don’t like to be at the tip of the spear in product and service offerings. In many cases, it’s far too risky to undertake a strategic direction that has been untested. The potential for failure is greater. So we opt for making incremental improvements to business as usual. But in my opinion, business as usual is a riskier course. Better to innovate and go out swinging, than to remain mired in the past and go out with a whimper.

But there are some leading edge bankers to use as your guidepost. Take Silicon Valley Bank in Santa Clara, California. Here is a bank that nurtures start-ups from the garage to global distribution (see picture from their investor presentation). Through their Accelerator Solutions, they package products, expertise, and connections into one business unit to improve the likelihood of start-up success. The bank has maintained an ROA at or near 1% throughout the financial and economic doldrums.

I understand SVB’s location allows them to specialize in serving tech start-ups and venture capital firms. But innovation need not start in northern California. In fact, I would put to you that this region benefits tremendously by having nearby support systems that foster innovation. Your markets can too. And why can’t it start with your FI?

Here are three things I think your FI can do to foster greater innovation in your markets that can drive economic prosperity, and therefore your success, for generations:

1. Develop specialized expertise within your FI to help entrepreneurs get their businesses off of the ground;

2. Create flexible product packages to make banking simple for early stage companies;

3. Find creative means to get capital in the hands of promising companies. This can be done through equity funding similar to what I proposed in my Shark Tank post, partnerships with various VC firms and institutions such as nearby insurance companies, factoring firms, etc., or outright balance sheet lending so long as you put a wall around the risk.

Should we continue to lament about our local economies or should we do something about it?

P.S. Subsequent to this post, Inc. Magazine published an article It Might Be Time to Break Up With Your Bank describing great alternatives to bank financing for small businesses. Why can’t we either do this lending or develop relationships with reputable lenders, as determined by our due diligence, and serve as brokers to this financing and advisers to our client?

*This blog was originally posted on Jeff for Banks

About Jeffrey Marsico: Mr. Marsico specializes in strategic planning, process improvement, performance measurement, and financial advisory. He has over nineteen years of financial industry experience, including: IT, Trust operations, retail branch management, strategic planning, financial institution M&A, consulting, and capital formation. He served seven years in the US Navy, earning three Navy Achievement Medals and other various commendations. He received a B.A. from the University of Hawaii and an MBA from Lebanon Valley College and serves on the faculties of the Pennsylvania and North Carolina Schools of Banking, and the ABA School of Bank Marketing Management.

Jeff can be found on his blog at: Jeff for Banks or the The Kafafian Group

Filed Under For Financial Institutions Tagged With financial institutions, innovation, Shark Tank, Silicon Valley Bank

Caught Between Custom And Commodity

February 4, 2013 By Banking.com Staff Leave a Comment

At a time when bank branches are disappearing with regularity and there seems to be more consolidation at the corporate level (though that isn’t necessarily the case), the head of the Office of Fair Trading (OFT) in the U.K. has a major problem with the industry. He thinks the market needs more banks.

Speaking to the Parliamentary Commission on Banking Standards late in January, Chief Executive Clive Maxwell didn’t stop there. He stressed that the market needs more banks to make the industry more competitive and focus more closely on the customer. Established institutions, he reported don’t engage customers enough because they don’t need to.

The 40-year-old OFT had its powers expanded in 2002 through an act of Parliament, but even earlier its word carried some weight. That’s why a pronouncement like this sparks an unlikely thought: If the government doesn’t think an industry is being well served by its players, should other players step up? Or is that a sign that they should stay away?

Here’s a different way to look at the same problem. As the plethora of online and mobile services hitting the market every week makes clear, retail banking just ain’t what is used to be.

As we’ve occasionally examined in this space, there are certainly alternative models emerging, but the reality is that the Internet is the great equalizer. The array of tools and apps available from every bank in every geographic market essentially makes it easier for every customer but harder for the bank to create differentiators.

The charge that banks aren’t “engaging” their customers enough is particularly strange in this regard. Isn’t that exactly what the blizzard of technology-enabled services offers? The truth is that mobile apps and other online services, many of which feature more customization and convenience than was ever possible before, represents an unprecedented level of engagement.

Here’s what might be considered the flip side of the equation. A blogger recently wrote about finding an old piggy bank he used to store the dimes he collected in his younger days. The dimes he found amounted to about $30; the piggy bank itself, by his estimate, cost $10. That got him pondering a ‘piggy bank’ test that evaluates the charges each bank’s customers incur, and whether they’re worth the price.

The OFT chief had a lot to say about this aspect too. He speculated that banks sell customers various products they don’t understand or even need, and drive up charges in the process.

There’s no clear bottom line here. Online or otherwise, banks will offer ever-greater customization and convenience, because in a free market, that is exactly what they should do. Services that are ultra-customized are by definition not for everyone, but that doesn’t mean the bank is giving customers services they don’t need. And of course, more banks will mean more services, not less.

We’re in the midst of a groundbreaking transformation for the banking industry. In a sense, we’re caught between two extremes—greater customization for the customer, possible commoditization (perish the thought) for the company. With new APIs and mobile devices coming down the pike, we’re actually going to see a spike in new apps. Some customers will appreciate that, and maybe some regulators possibly won’t.

So how will banks distinguish their offerings? How will customers react to new services giving them capabilities they never thought but like (and will have to pay for)? What will regulators have to say about it?

It should be fun to watch. Stay tuned.

Filed Under For Financial Institutions Tagged With banks, Office of Fair Trading, Parliamentary Commission on Banking Standards, piggy bank

Fast Facts: Financial Executive Economic Outlook Report

February 1, 2013 By Financial Services Roundtable 1 Comment

The Financial Services Roundtable recently released another iteration of it’s Fast Facts, reliable, bullet-point research about issues facing the financial services industry. This series is the The Financial Services Roundtable’s first bi-annual Financial Executive Economic Outlook Report, which shows positive expectations for company profitability and capital reserves, despite an increase in compliance costs.

FACT: In a survey of Roundtable member leadership, ninety percent of financial services executives expect their companies’ profitability to increase (58%) or stay the same (32%) during the next six months.

10% expect their companies’ profitability to decrease.

FACT: Roundtable executives are optimistic about employment: nearly three-quarters of executives expect employment to stay the same (36%) or increase (38%) during the next six months, while one-quarter (26%) expect employment at their firms to decrease.

FACT: Capital reserves are at historic highs, and are expected to continue rising.

Nearly all financial services executives expect capital reserves to increase (72%) or stay the same (25%) during the next six months.
Banks’ average Tier 1 capital ratio set a new record of 13.25% in the third quarter of 2012, according to FDIC data, and bank capital is at $1.6 trillion – the highest level in history.

FACT: Overwhelmingly, financial services executives expect compliance costs to increase during the next six months.

84% of industry executives expect compliance costs to increase during the next six months; 15% expect compliance costs to stay the same; and only 1.6% expect compliance costs to decrease.

FACT: Government regulation and fiscal uncertainty are the largest challenges hindering company growth.

Top policy issues are split between capital and liquidity rules (30%) and the Consumer Financial Protection Bureau (28%).

Click here to download the complete Q1-2013 Financial Executive Economic Outlook Report.

Filed Under For Financial Institutions Tagged With fast facts, Financial Executive Economic Outlook Report, The Financial Services Roundtable

Your Money or Your Bank

January 28, 2013 By Banking.com Staff Leave a Comment

Customers logging into the Citizens Bank site had a problem last week. The online services “were not available at this time,” they were told, and while no reason was given for the outage, it seemed apparent that foul play was involved, specifically a DDoS (Distributed Denial of Service) attack.

This is by no means the only bank to be on the receiving end of such assaults, and Citizens even had more traditional criminal issues to deal with—two of its branches in Philadelphia suffered old-fashioned bank robberies. True to pulp fiction form, one was from a perpetrator wearing a surgical mask, while in the other case the suspect handed a note to the teller demanding money, got away with an unspecified haul and, yes, is “considered armed and dangerous.”) Still, the outage is newsworthy specifically because it captures so many trends of the moment.

First, a spokesperson for the bank politely urged customers to find their way to a local branch—advice that will seem increasingly irrelevant. This has nothing to do with the incidence of bank holdups; it’s simply because the number of branches is dwindling. According to a report from research firm SNL Financial, banks closed 2,267 branches last year while opening only 1,149. That’s the biggest net loss since the firm began tracking closures in 2005.

There’s no single reason for this, of course. The economy at large, competitive factors, government regulation, shifting interest rates, internal priorities—they are all factors in any given trend. However, as even the new report makes clear, many financial institutions are encouraging their customers to move to online and mobile banking.

Which brings us back full circle to the issue of online outages, and the most recent problems in that area.

Any news search at any given time yields a plethora of stories about banks launching new initiatives in the online/mobile space. There are always deals being offered to draw new business, mobile apps developed and released to the market (both consumer and business) and significant investments being made. For everything from infrastructure to customer convenience, this is where the action is right now.

In this context, even a minor outage can be devastating. Customer loyalty can be extremely fickle: Just as retailers have found that the unavailability of a single item can mean the loss of a customer forever (since there are so many alternatives available at the click of a button), banks may find that patrons will go elsewhere because it’s easy to do.

Even the best security measures cannot guarantee that there will never be a data breach. DDoS attacks of the kind apparently experienced by Citizens Bank—which create enormous amounts of fake traffic to a targeted site, temporarily crashing servers and weakening defense—will likely gain in popularity. Customers don’t know or care what the problem is; they’ll know there is one and take their business elsewhere, and tell their friends to do the same (not just through word of mouth but also widely disseminated social media).

In essence, the ROI of any investment in online and mobile banking must involve more than the sum of its parts. There will always be online attacks and outages. The differentiator might be in how the affected financial institution deals with it.

Filed Under For Financial Institutions Tagged With banks, brick & mortar branches, Citizens Bank, DDoS, Distributed Denial of Service, outage

Banks: Games People Play

January 23, 2013 By Banking.com Staff Leave a Comment

If you want to see how much technology has changed the relationship between banks and their customers, then take a trip down to the Berkshire Bank branch in Pittsfield, MA. Yes, branch, as in real-world, brick-and-mortar, set-in-stone structure staffed by flesh-and-blood humans.

It’s got cash dispensers, high-quality TV screens, Sony PlayStations and a community room that can accommodate up to 30 people. And while this is the county’s largest bank, at least nine other Berkshire outlets have been similarly renovated recently.

Perhaps the most interesting addition has been teller pods, which essentially remove the time-honored barrier between customer and teller. In this arrangement, the teller stands in front of the computer, right alongside the customer during each transaction. If the teller is busy, there’s a place for the customer to sit while waiting. Cash dispensers situated by the pods enable tellers to stay accurate without actually counting the bills—another anachronism that can be happily disposed of. (It’s interesting to think about how bank robbers see this.)

The rationale behind all these changes, of course, is to personalize and enhance the interaction between corporation and consumer. People generally don’t go to the bank unless they really need to, and the inclination is always to conduct the transaction and depart as quickly as possible. For their part, most branches assume that the customer who can leave the fastest is the happiest.

However, when so many banking transactions are conducted online, it’s surely worth taking a look at alternative models.

In a sense, this approach flips conventional wisdom in other ways too—while consumers use banking apps to stay away from the branch, these banks are using different kinds of technology (teller pods, TVs, gaming consoles) to lure the customer inside the branch, and keep them there. The question is the extent of the value that can accrue from this relationship.

Not every branch has the space to even offer a community space, and customers who come in to, say, make a withdrawal have no real business staying there after they’re done. However, given the number of options now available to every consumer, anything that strengthens the relationship is a good thing.

A long time ago, IKEA created a differentiator by offering space for children to play while their parents shopped for furniture (it had been done before, but probably not to that extent). It’s even easy to surmise that kids clamored to go to the IKEA playpen, which in turn induced their parents to shop.

It’s hard to think of a direct equivalent for the banking industry, but it’s definitely interesting to see what innovative companies will try to lure new business and retain what they have. Might we see good banking combined with fine dining—a restaurant inside the branch, open only during banking hours? How about a sports bar where you get a drink and watch the game while paying your bills? Perhaps laundry services while you wait for a transaction to clear?

Comic speculation aside, innovation is always welcome. The banking industry’s reputation has taken a battering recently. Any approach designed to strengthen the brand and cultivate relationships is a very good thing.

Filed Under For Financial Institutions Tagged With banks, Berkshire Bank, brick & mortar branches, gamification

Love at First Use: Three Tips for Building Awesome Products

January 18, 2013 By Brad Smith Leave a Comment

It’s said that you never get a second chance to make a first impression. Nowhere is this more true than in product development. You may have built a truly amazing product, full of wonderful features that deliver lasting value to customers, but if you don’t have an amazing first-use experience, it’s game over!

In today’s world, first impressions matter more than ever before. Prospects have little patience for friction or confusion. In a mobile-first world, potential customers will download and test-drive our app, and if it doesn’t deliver some benefit or WOW in its first impression … they press the app until it wiggles, hit the X, and go searching for a better solution.

This new reality has motivated us to take a fresh look at our first use experiences, and our observations have led to three guiding principles to successfully introduce customers to our products:

Time-To-Benefit: Make sure that the customer immediately sees how and why they would use the product. Resist the temptation to reveal all the great long-term benefits, but instead, focus on getting to real core customer value in a simple, fast and approachable manner.

Ease (Do It For Me): Only ask for the absolute minimum information to get started. Once you ask for it, don’t ask again. Every request for information introduces friction and can reduce conversion significantly.

Emotional Delight: Go beyond functionality and surprise your customers. Make the most important tasks easier than expected. Seek to create moments of “Wow!” that will generate positive word of mouth.

A great first use experience is the front door to powering growth for a new or existing product. Don’t let all the hard work that goes into creating a great product be sabotaged by not putting in the time and effort of designing a delightful gateway. None of us want to see the next thumb being placed on our wiggling app to delete it!

*This blog originally appeared on LinkedIn. You can follow Brad Smith on LinkedIn here.

Filed Under For Financial Institutions Tagged With Brad Smith, customer satisfaction, customers, Intuit, products

Industry Perception, Optical Delusion

January 14, 2013 By Banking.com Staff 2 Comments

In Washington, they talk a lot about ‘optics.’ This has nothing to do with regulatory scrutiny, or government mandates on eyeglasses. It has to do with perception—how something looks, the way a particular story or incident comes across to the public at large. For example, when a presidential candidate makes a speech on camera, there’s a full team of image handlers making sure that, policy implications aside, the whole event looks and sounds right. The backdrop of flags, the blend of folksiness and credibility, the focus on sound bites—it’s all about optics.

The financial services industry has terrible optics. Even with massive lobbying efforts and armies of PR specialists, the stories that dominate the news and capture the public imagination—in effect, go viral—seem calculated to portray the worst stereotypes.

The most recent entry to this dubious gallery is surely Maurice R. “Hank” Greenberg, former chairman of AIG, the recipient of a massive government bailout a few years ago. Mr. Greenberg now heads Starr International Co., which was once a major AIG shareholder and is now pursuing a lawsuit against the very same government that rescued the corporation. The reason: the terms of the bailout were apparently too onerous. Starr wants about $25 billion in restitution.

To be fair, AIG—which has been publicly thanking the nation for the bailout—eventually declined to participate in the suit. However, the very fact that such a move was under consideration, not to mention Starr’s ongoing litigation, has unsurprisingly sparked a barrage of criticism from across the media and blogosphere. Even tastemaker Jon Stewart devoted a lengthy segment of ‘The Daily Show’ to the subject.

Also in Stewart’s crosshairs was HSBC, another star in the Hall of Shame. That storied corporation has earned infamy for its recent exploits, which apparently included dealings with a host of shady characters and institutions across the notoriety spectrum. The company agreed to pay massive fines last year for alleged money laundering, and is now part of a proposed mortgage settlement alongside such marquee names as Goldman Sachs and Morgan Stanley.

As documented here recently, HSBC is a prime example of the ‘too big to jail’ phenomenon—companies that don’t face even harsher penalties because that might destabilize other parts of the industry, or even the economy at large. This aspect in particular arouses the ire of many credible industry critics, and at some point the patience will surely run out.

Because of these and other noteworthy problems—think everything from credit-default swaps to LIBOR—criticism of the industry is now coming from a broader audience than ever before. Writers at such distinctly non-leftist outlets as Forbes and Harvard Business Review, among many others, have piled on with harsh words. For the record, these issues do have nuance, and the Wall Street Journal, among others, has pointed out the subtleties in the AIG issue. But none of that gets away from the optics—it all looks really bad, and that will have consequences.

It’s not as if every other industry gets away clean. The energy sector had many perception problems even before the British Petroleum oil spill, cable companies get savaged for bad customer service and airlines take it on the chin every time a flight is delayed or a bag gets lost. But the financial services industry is about, well, finance, and that’s a very different issue. People are funny about money, and that affects how we go about our business.

There’s no panacea here. Corporations large and small will occasionally make mistakes or behave badly, and those errors will reflect on everyone else in the business. Our job in the trenches is to provide great service to our customers, and if we do that everything else will take care of itself. Looking at the year ahead, however, the industry’s representatives in the capital and the media would be wise to worry about the optics.

Filed Under For Financial Institutions Tagged With AIG, Goldman Sachs, government mandates, HSBC, Morgan Stanley, Washington D.C.

All Hail 2013: It’s Time to Change

December 28, 2012 By Banking.com Staff Leave a Comment

As announcements go, it wasn’t a very big deal when the British Bankers’ Association said at the end of the year that it is urging its 200 member banks to participate in a broad, two-pronged initiative to boost the industry’s image. Part of the plan is to monitor “people’s concerns before they become massive scandals”—a worthy goal, to be sure. But this wasn’t an isolated symptom of the problem. At around the same time, a Financial Times survey of 93 Members of Parliament revealed that fully two-thirds of the legislators believe British banks should be required to create a stronger barrier between investment banking and what’s known as ‘high-street’ operations. More worryingly, this wasn’t a liberal push for more regulation—the number of Conservative MPs backing the idea is actually higher than their Labour counterparts. There’s already a proposal to create a ‘ringfence’ around retail banking, but the new research indicates that many think the changes don’t go far enough.

That’s really the recurring theme here. If 2012 was a year of major change for banking institutions and individuals around the world, then 2013 will require even more.

A tsunami of bad news throughout the year was capped off by the news late in December of massive fines levied against UBS. The Swiss banking conglomerate ponied up $1.5 billion to global regulators, including $700 million to the Commodity Futures Trading Commission (CFTC) alone, the largest such settlement in the agency’s history. The fines stemmed from the charges of manipulation directed primarily at the bank’s Japanese securities subsidiary, all part of the mushrooming Libor scandal.

Some are even calling for the company to be shut down—an action that would surely cause ripples throughout financial markets worldwide. This brought up unpleasant memories of a similar situation earlier in the year, when HSBC was accused of money laundering and other transgressions. In that case, the company agreed to pay $1.2 billion in restitution, yet calls for more stringent penalties met with strong resistance even from regulators. The reason: more criminal charges could destabilize the global financial system. Moving forward, it should be apparent that regulators, and the public at large, will lose patience with a ‘too-big-to-charge’ environment in which massive institutions are able to avoid serious penalties because of their size and clout.

Continuing with the bad news global tour, Japan got a new Prime Minister around Christmastime, and he promptly sent signals that he will bring pressure on the Bank of Japan to essentially monetize the national debt outright. Whatever the merits of his strategy—which goes beyond any stimulus spending in the U.S.—the feeling is that it goes a long way toward taking away the Bank of Japan’s independence. This is a major story that hasn’t received much attention so far. Expect that to change in 2013.

While these are established institutions, there was also evidence that new players with different business models have a hard time breaking in. TandemMoney was an interesting idea designed to meet the needs of the unbanked and underbanked by providing a line of credit that required customers to sign up for direct deposit. A combination of savings and credit would thereafter deal with unexpected expenses. The company saw itself as an innovative startup that would protect consumers from institutional loan sharks. Instead, it will be seen as a cautionary tale—unable to satisfy regulatory scrutiny, it soon shut its doors.

Despite this seeming litany of bad news, it definitely isn’t all gloom and doom. In fact, the industry as a whole is not exactly suffering—the four largest banks in the U.S., particularly Bank of America, had quite a good year, and according to reports some regional banks did even better. A few greatly outperformed their much larger competitors, and that trend is expected to continue. Cautionary tales aside, nimbleness and innovation are still being rewarded.

Other aspects of change are equally welcome, at least to non-Luddites. For one thing, the move toward mobile banking continues to escalate.

We all know about the trend in developed markets, but it seems to be spreading far beyond those borders. The State Bank of Pakistan just announced that between July and September alone, the number of new mobile banking accounts spiked by an astonishing 25%. The news provides more evidence that in developing nations where the lack of infrastructure is a serious hurdle to economic growth, the building of mobile capabilities allows them to leapfrog traditional foundations and gain a major advantage through the proliferation of mobile technologies. (Neighboring India has already taken significant steps forward in this regard.)

Also, despite the buzz, mobile isn’t the technology paradigm changing the face of the industry—cloud computing is another. To give just one example, National Australia Bank just provided an update on its highly ambitious 10-year technology transformation plan drastically improve the customer and banker experience and avoid obsolescence in the process. The bank has already upgraded its network from eight voice and data networks to one, and will virtualize employee desktops, among many other advances. At the heart of the change is the core banking overhaul, which will enable it to retire more than 100 legacy applications. In December, the bank opened a social media command center with cloud-based technologies that enable the staff to field thousands of comments and service requests every month. This is exactly the kind of ground-level change that forward-thinking banks around the world need to undergo.

In fact, one interesting trend to monitor this year will be changes in the CEO position. It’s a safe bet that those executives who get the ax will get it not because they’re resisting change but because they’re not changing fast enough.

Which brings us back to where we started. If the year just ending was a challenge, the next one will be even more so. From presidential elections and regulatory reform to emerging markets and mobile apps with startling capabilities, we’re all in transition mode. Organizations everywhere can see that there must be a transformation in foundational principles, bedrock strategies and longtime operating practices. It’s scary but exciting, and institutions that can change with the times will find more opportunities and better returns than ever before.

Filed Under For Financial Institutions Tagged With 2013, banking news, financial institutions, New Year

Senator Warren Has the Floor

December 20, 2012 By Banking.com Staff 2 Comments

Immediately after the election, we identified some areas that the banking industry needs to track to see what changes are coming in the era of Obama 2.0. The No. 1 topic: incoming Senator Elizabeth Warren of Massachusetts. As we asked then, “Will she seek, and get, a spot on the Senate Banking Committee?” Well, we have the answers: She did, and she did.

So what happens now?

For a junior senator who’s yet to spend a day in the Senate, Ms. Warren’s presence has stirred up strong emotions already. Even before the committee appointment, her election was tagged as a “crushing defeat for big banks.” That’s true in a literal sense—the industry at large contributed heavily to her opponent, incumbent Sen. Scott Brown, who she trounced at the polls.

The reasons for the wariness towards Sen.-elect Warren are well documented. She’s been a strident critic of the larger institutions, even advocating a modern-day version of Glass-Stegall, the 1933 legislation that curtailed the mingling of commercial banks and securities firms. The report she developed for the nation’s 50 state Attorneys General in 2011 alleged that many large banks had avoided regulatory mandates when servicing certain home loans. (The banks eventually settled with the government for more than $25 billion.) And of course, she was behind the creation of the Consumer Financial Protection Bureau (CFPB), the watchdog agency strongly opposed by many conservatives.

Ironically, it was resistance to her suggested appointment as head of the agency that led to her run for the Senate. Many feared that as director of the newly empowered CFPB, she would have too much power. As a senator with a seat on the Banking Committee, she might have more.

Of course, the concern may be premature. By all accounts, Sen.-elect Warren is more sober academic than hippie radical. She taught law at several universities before joining Harvard Law School, where she specialized in bankruptcy law. Throughout her career she has written extensively about the U.S. economy, and her legislative credentials are hard to dispute. She chaired the congressional panel empowered to supervise TARP (Troubled Asset Relief Program), the bailout program initiated during the Bush administration. She became a Special Advisor to Treasury Secretary Tim Geithner and also served as Assistant to the President.

So is the industry wrong to be worried?

She clearly has a strong point of view—her impassioned defense of tax fairness, captured on video, served as a foundation for President Obama’s own “you didn’t build that” campaign theme. From her perch in the Senate, she potentially has the clout to drive the changes she has long advocated.

However, the reality is more complicated. The U.S. Senate has long been known as the world’s most deliberative body, which is a nice way of saying it takes a long time to do anything. The institution’s bipartisan reputation for seniority, hierarchy and patronage is well-earned, and as a junior senator she will have to work the system before she can overhaul it. Even former First Lady Hillary Clinton had to play by the rules when she got in.

Observers point to a freshman senator from Illinois named Barack Obama as an example of someone who broke through, but he was clearly the exception. In fact, he serves as a potential template for Sen.-elect Warren’s own path to power—many have speculated that she has a White House run in her future. Consequently, she will be under constant scrutiny, with every public utterance parsed for meaning. For a variety of reasons, she is categorically not in a position to drive through major change in a hurry.

Still, the industry would do well to build bridges, if not to her then at least to her constituency. She won the election decisively, with strong support for the reforms she wants to make, and she will likely have White House support when she does make a move.

Bottom line: Working with her when she’s a junior Senator will be a lot easier than working against her if she becomes president.

Filed Under For Financial Institutions Tagged With Consumer Financial Protection Bureau, President Obama, Senator Elizabeth Warren, Treasury Secretary, U.S. Senate