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Community banks must use size to their advantage
During the last several years, the banking industry has witnessed an increasing divergence between community and nationally chartered banks. Several larger institutions have absorbed leading regional players in an effort to boost deposits and loan portfolios. On the surface it may be perceived as a distinct disadvantage for community banks as more sizeable banks continue to extend themselves into new areas and blanket Main Street with marketing collateral. However, as this separation grows wider it offers community banks more opportunities than ever before to elevate and differentiate their offering above the competition.
Some would say this competitive threat could spell doom for the community banker. Nothing could be further from the truth. Large banks often miss the mark on acquisitions, because they are attempting to acquire what community banks already possess - quality relationships. Nationally chartered banks tend to work from the assets-forward instead of the customer-back when eyeing an acquisition target. Primarily, they are concerned with capturing market share and deposits. However, what accelerates market share gain is convenience, service and empowering the right people at the branch level to make decisions for local customers.
Due to sheer size, the banks that have grown through acquisition have been forced to homogenize their offerings, placing less emphasis on customer service and personal interaction. Typically, this is done because it doesn't make financial sense for them to treat customers as individuals. Herein lies the advantage for community banks. They can't afford NOT to treat customers at the branch level as individuals. The truly great community banks know their best assets are human - employees and customers. While loans and deposits are the keys to being profitable, they cannot be gained without cultivating long-term relationships with customers.
Community banks can create an even stronger bond with individual customers by broadening the services they provide. Smaller banks will have to work even harder to remain competitive in the face of national banks that become a one-stop-shop for all of a consumer's financial needs - from loans to credit cards. Community banks can gain a greater share of the "wallet" by increasing the breadth and depth of financial services offerings, including mortgage services, financial planning, and more. By expanding and promoting new services to customers, community banks can be viewed as more of a resource. By protecting individual household's financial well-being, community bank representatives can be viewed as trusted advisors with more to offer than free coffee and loan applications.
Autonomy is equally important. Allowing decisions to be made at the branch level builds trust with customers and employees - the human assets that perpetuate a bank's success. Ultimately, autonomy at the branch level will be one of the main differentiators between national banks and community banks. Cultivating personal relationships, knowing customers by name and making their financial goals the bank's goals are the advantages that come with being just the right size.
Community banks have long been accustomed to valuing and spending time building strong customer relationships, knowing that is what differentiates them. As large banks become larger and even more far-reaching into the financial arena, the personal touch that community banks are able to offer customers will be the key to their growth. Customer service needs to be more than a phrase in a mission statement. Customer service and putting people before assets are the keys to keep America's community banks thriving.
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