Community banking’s role in serving small businesses

Community banking trends

Amid the pandemic-related uncertainties and shifts in market conditions, resilience and flexibility have helped banks discover new opportunities. US community banks survived the unprecedented disruptions due to the crisis, with even more customers and inflated deposit accounts on the back of stimulus programmes and the rapid distribution of funds to customers.

About community banking

Community banking organisations (CBOs) are at the heart of the US banking community. They take deposits and grant loans, helping small businesses and non-profit organisations to grow and strengthening communities. Community banking is based purely on relationships and providing personal attention.

Key factors that have affected community banking

1) Economic mergers and consolidations. Banks restructure and engage in mergers and acquisitions to achieve economies of scale — increased revenue, enhanced product offerings and extensive client bases that present additional cross-selling opportunities. Mergers and acquisitions also help transfer assets from less efficient organisations to more efficient ones that can realise the benefits of scale.

  • Offer a service tailored to customer needs. Community banking is also referred to as “relationship banking”, but banks can maintain personal relationships with customers while adopting new technologies. They can continue to incorporate new innovations and approaches to reduce costs and manual intervention, while capitalising on their strengths in customer service.
  • Adopt new revenue models. Banks should not hesitate to consider new offers that would drive their revenue models. For example, a subscription banking model could offer customers premium services, including a safe deposit box, consultation with a financial planner or a free checking account.
  • Ensure customer convenience. Mobile apps and service providers offer a number of personal and business finance services. Consolidating financial accounts into a single app would make banking easier for customers and provide useful insights and opportunities.
  • Financial unbundling. Pursuing strategic partnerships and adopting the right blend of technology and human support would make decision making faster and easier. Third-party providers could offer highly specialised, value-adding and cost-effective solutions to core banking processes. Customers would also gain access to the rapidly growing number of financial service providers with innovative models that offer products in a different way, at a lower cost and with fewer preconditions.

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Acuity Knowledge Partners

Acuity Knowledge Partners

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We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/