The Rise of Shadow Banking
Financial services, as an industry umbrella term, includes personal finance, M&A, credit card related services, and robo advisors—just to name a few. As expected, the “big” banks offer something in all of these areas. However, since the financial crash of 2008 and the coinciding rise of AWS, iPhones, and frictionless services, non-banks are finding creative ways to fill financial needs for both consumers and businesses across the country in a phenomenon known as shadow banking.
Many Silicon Valley and New York based startups like Venmo or Betterment have filled service gaps that were either traditionally owned by financial services companies or abandoned due to lack of vision or profits—with great success. According to a working paper from the National Bureau of Economic Research, the market share of shadow banks in the mortgage market nearly tripled from 2007-2015.
Shadow bank origination shares as a fraction of total originations for all mortgages in HMDA between 2007 and 2015.
Fintech, Regulatory Arbitrage, And the Rise Of Shadow Banks by Greg Buchak, Gregor Matvos, Tomasz Piskorski. Amit Seru, Working Paper 23288, http://www.nber.org/papers/w23288
Pivot Your PR Program
What does Shadow Banking mean for a financial PR program? As in every industry, there are less reporters and more micro-beats to know than ever. However, given the sheer volume of companies that see the opportunity in “revolutionizing” finance, shadow banking continues to grow the competitive landscape to a size where any one brand has minimal chance of breaking through.
Take small business lending, for example. The online lending space has doubled in size every year since 2010, according to Morgan Stanley, and analysts predict $1 trillion in new loans will be processed through online marketplaces globally by 2025. You used to be able to stay on top of it if you simply kept up with what was going on with the major players in the banking industry, yet, with new marketplace lenders and crowdfunding sites every month, there are almost too many different spaces to keep tabs on.
Stand Out From The Crowd
So, how can you help your client stand out in a space that keeps getting more and more crowded?
- Don’t be afraid to take a controversial stand on an issue that’s influencing your industry. For example, if more regulation will hurt your business although it seems to be the popular opinion, don’t be afraid to articulate why you have an opposing view. Pitching that point-of-view to reporters will be far more likely to catch their attention than a me-too statement (that’s likely also coming from your competitor).
- Utilize the power of automated news monitoring. Google Trends is a great source for PR professionals seeking specific words and terms that will resonate with reporters for their pitches.
- Understand which outlets drive the most traffic to your client’s website and plan accordingly. Everyone loves coverage from top tier outlets, but smaller industry news publications may bring more prospective customers to your client’s homepage. Ensure that your team knows which articles are driving the most interest for your client and plan your PR program accordingly.
- Consider in-app advertising to fintech/finserv related sites. Given mobile’s key role in shadow banking, leveraging advertising inventory for related apps and sites can put your brand in front of the right audience.
The greater financial services sector will continue to grow in the years to come as Silicon Valley wields its influence over the Financial Crisis’ lingering white spaces. Whether your client is a large national bank or an up-and-coming fintech, understanding your competitors, establishing a firm grasp on the sector, and not being afraid to take a stand will serve you and your clients well throughout the life of your PR program.