RED DEER – Farmers may not want to believe it, but small financial lenders on the Prairies say their business is being threatened by bigger competitors with deeper pockets.
John Erdman, one of three agricultural managers with Alberta Treasury Branches, said that while the treasury branches are the largest agriculture lenders in the province, shifts in the banking industry could soon change that.
He told a recent Alberta Agriculture economists meeting that new technology has introduced
automated teller machines, 24-hour banking, on-line banking and telephone services.
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He said large banks can afford to offer more financial advice and larger investment portfolios than a crown corporation can.
“It is very hard for a small financial institution to compete in the marketplace with a large player.”
Also on the horizon is the arrival of new banks, which Erdman calls one of the biggest challenges facing small lenders. One of them is Wells Fargo, which Erdman said is the largest agriculture lender in the United States. It can afford to offer more services.
Treasury branches and credit unions do not have the deep pockets of chartered banks and are not big investors because of the risks.
“These people can come in with the new technology and their cost of entry has decreased and their cost of exit has decreased.”
Farmers have also changed, Erdman said. While bankers used to deal with subsistence grain farmers, producers are now well educated with instant access to brokers and financial advisers.
“You have to serve them well or you’ll look like a bit of a buffoon.”
