I remember the sense I had as a child of what banks meant in my hometown of Elizabeth, N.J. They were solid: The names of the banks were literally carved in stone in the facades of the building where my parents placed their funds, and their trust. A bank was something that stood for your community. It was part of your hometown, and its people were your people.

Today those banks are being bought up wholesale by people with no stake in the community; what was once carved in stone is often being covered up with glitzy plastic signs that come and go unpredictably. It can be confusing, this "plasticity" in the banking world. But it is also an opportunity for small banks that can adapt to this environment while maintaining the commitment to their communities that made them strong.

The confusion is clear at the most basic retail level. Anyone trying to decide how to open a basic checking account in New Jersey today faces a more confusing picture than was conceivable 10 or even five years ago. In the past few years, out-of-state conglomerates have come into New Jersey in waves.

Behind the scenes, too, the world of banking is being transformed. Regulatory reform has allowed long-established, traditional savings and loans to offer car loans and credit lines. Borders are even being blurred between other types of financial institutions as banks begin to sell insurance, mutual funds, and other investment products.

The result has been intense competition at all levels of banking. There has also been a merging of the consumer markets these banks are competing for: banks that serviced different markets 10 years ago-commercial or residential checking, small business loans or consumer credit, home mortgage, etc.-are now competing for the same, much larger pool of customers.

While small banks today thus operate in an environment that presents tremendous challenges, it is also one that is rich with opportunity.

Community banks need to diversify their services and better understand their customer base as a part of this refocusing process.

We also need to be aware of broader social trends that affect the service different markets require, and to maintain product lines and a marketing presence that reflect what your customers mean by "personal service." The aging of our population and the rise in two-income families are two such trends that reflect the increased need for convenience and service in banking-service that must be tailored to these very different market groups.

To be sure, community banks also need to be more efficient and technically savvy to serve their consumers in today's world. But they must not sacrifice service for efficiency. Technical innovations must not target simple efficiency, but also make service truly personal in ways that haven't been conceived before.

Indeed, it has been my own experience that in today's community markets, efficiency and personal service must go hand in hand.

We even need to rethink what we mean by "community." The communities we serve are defined by their banking needs, not their addresses. Technology has made it possible for small banks to think in these terms; competition has made it necessary.

At Statewide, for example, we have identified communities that already exist within companies and other organizations. Working with what we call "affinity groups," we are able to network with human resource people and other company executives to develop, offer, and maintain efficient, low- cost account products that are literally custom-tailored for an identifiable group of customers.

Initiatives like these wed high efficiency and personal service. It's this kind of thinking that will set small banks apart from the commercialized monoliths and their uniform product lines. Our experience has repeatedly shown that there is undoubtedly a market for traditional, personal service provided in new, sometimes bold ways. It's this kind of commitment to the consumer that is necessary if community banks are going to do their job in today's world.

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