Don’t fear big-bank competition. Lean into it.

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A senior leader at a large bank recently asked me an interestingly worded question.

We were talking about the changes taking place in his organization and most of his peer group banks.

These companies are making tremendous commitments to becoming digital first banks. Physical branches remain central to their businesses, but the race to empower customers with ever more enabling digital tools has been fully joined.

He asked: “What are you seeing out there? Do you believe that community banks have any idea of the train that’s coming down the tracks. ... How can they keep up?”

He was referring to the aggressive push his and other large banks are making to promote digital banking and customers’ growing familiarity with and preference for that channel.

I said that it’s hard to make blanket statements about such a large group of businesses. Some pundits seem to believe that community banks are basically homogeneous.

To my experience, that’s simply not the case. Yes, you can bunch banks into groups by asset size, number of branches, rural versus metro markets, etc. And from the 30,000-foot view, sure, similarities are apparent.

But when you travel the country for a couple of decades and meet a few thousand community bankers, you see things a bit differently.

Sure, there are always going to be people in any industry, banking included, more interested in defending the business model that has brought them success, rather than considering that even historically sound business models tend to become ineffective in time.

That’s not an indictment of the past. Technologies, customer preferences and industries evolve.

That said, I’ve met many incredible business minds at community banks. Some of these folks know their individual markets, their customers and even their competitors at granular levels.

These folks aren’t terrified over big-bank competitors. They absolutely respect them. They simply believe they will not allow another bank to outhustle them in their own markets.

They also realize a technology race is something they cannot win. They strive where possible to be reasonably fast “second movers” as the technology bar rises. Smart community bankers also know that their business models cannot rely on being a technology leader.

If they sit back and allow their businesses to be judged primarily by what a customer can do from a smartphone screen, they will be perpetually behind the eight ball.

It’s also not an accident that some of the better salespeople I’ve encountered have worked for institutions outside the largest 100 banks.

When you are constantly competing against bigger competition, you better have a willingness to get out into your markets with a story worth telling, a talent for listening to customers and a value proposition worth consideration.

As we circled back to his initial question, I suggested that the answer is a mixed bag. I find that, by and large, community bankers are fully aware that the tools of their trade and rules for engagement are not changing. They have already changed.

Digital banking tools that were “premium offers” only a few years ago are absolute table stakes now. It’s becoming next to impossible to compete without them.

It’s also a near certainty that larger operators will be able and willing to compete in markets that were once considered too small. When competing in a market required considerable investments in real estate, brick-and-mortar branches and large staffing models, moderate markets didn’t warrant the investment for some banks.

Now that markets can be effectively entered with much lighter branch footprints and robust digital offerings, some community banks that have been big fish in smaller ponds may find that those ponds have become open waters.

Shrewd community bankers are not frozen on the tracks with a sense of impending doom. They are adapting to the new normal, refining their business focus and getting more obsessed than ever with communicating with their customers.

Increased competition in any evolving industry will tend to thin the herd. In the end, however, increased competition is making many of the best community banks run even better.

They’re becoming more efficient, more sophisticated and more customer focused than ever. They are rediscovering what makes them special or unique and why it’s so critical to lean into those things.

Bankers at institutions of all sizes are evolving into the vital human interfaces of largely online operations. The organizations with the most talented, engaged and motivated bankers — the best human interfaces — are going to win.

That train has left the station.

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