Where do community institutions lead the way? Where are they falling behind?

Strategy

Key points:

  • Consumers and small business owners (SBOs) prize many of the core values of the community banking experience, believing that community financial institutions (FIs) make a more positive impact on their local communities than large national banks.
  • However, consumers and SBOs agree that community banks and credit unions appear to be falling behind in one area—convenience. 
  • In an increasingly competitive landscape, low fees and superior service might not be enough to maintain a strong foothold in the market. Traditional FIs must close the convenience gap or risk obsolescence.   

Last summer, MANTL commissioned the 2021 Banking Impact Report to explore how industry trends are impacting community banks, credit unions, and the communities they serve. We spoke with banking executives, small-business owners, and consumers across every demographic to help us understand what’s at stake in community banking, and how forward-thinking leaders can navigate what’s next.

In this deep-dive post (the second in a series), we’ll explore a key topic from our survey data: the competitive landscape. Read on to discover how consumers and SBOs perceive the value of community institutions compared to megabanks and neobanks—and where community FIs are falling behind.

Community FIs lead the way on rates, service, and local impact—but not convenience

Our study indicates that many consumers still prize some of the core value props of the community banking experience: low fees, superior customer service, and deep community involvement. They regard national banks, community banks, and credit unions with approximately the same high level of trust. 

We did, however, identify one major area where community banks and credit unions appear to be falling behind—convenience. This finding reflects an emerging reality of consumer expectations in the digital age: if you’re not at people’s fingertips, you’re too far away. 

Consumers believe that community FIs deliver:

  • Greater local impact (55 percent)
  • More personalized service (44 percent)
  • More flexibility (41 percent)
  • Lower rates and fees (37 percent)

But national banks deliver:

  • A more convenient experience (33 percent)

Our survey also revealed that when it comes to digital services like mobile transfers and fraud notifications, a significant gap has emerged between what consumers want and what community FIs provide:

Mind the expectation gap

  • 61 percent of consumers want mobile transfer and check deposit while only 51 percent of community FIs offer it
  • 57 percent of consumers want notifications for fraud, bills due, and large purchases, while only 45 percent of community FIs offer it

Consumer preferences are driving SBOs’ expectations

The 2021 Banking Impact Report found that when it comes to convenience, business owners want many of the same options available to consumers. 

For example, 57 percent of SBOs say online account opening is a must-have (compared to 58 percent of consumers). That number goes up significantly when we take a closer look at key demographics:

Who wants online account opening?

  • 57 percent of all SBOs
  • 59 percent of SBOs with $1M to $25M in revenue
  • 69 percent of Millennial SBOs
  • 91 percent of Gen Z SBOs

Other expectations depend considerably on the age of the respondents:

Integration with payment apps (such as Venmo and Apple Pay)

  • Expected by 58 percent of SBOs under the age of 40
  • Expected by 43 percent of SBOs over the age of 40

Cardless ATM access (via mobile phone)

  • Expected by 48 percent of SBOs under the age of 40
  • Expected by 27 percent of SBOs over the age of 40

Easy accounting/payment tools (such as wire transfers)

  • Expected by 25 percent of SBOs under the age of 40
  • Expected by 17 percent of SBOs over the age of 40

While nearly half (45 percent) of community bank and credit union executives believe that their digital services are more convenient than big national banks, SBOs don’t agree. A full 40 percent say that large national banks offer the most convenient services for business account holders.

These findings indicate the perilous position of too many local and regional institutions: in an increasingly competitive landscape, low fees and superior service might not be enough to maintain a strong foothold in the market. Traditional FIs must close the convenience gap or risk obsolescence.  

The road ahead: partnering for success on your digital journey

Relationships are at the core of community banking. Now is the time to start leveraging them to find out what your customers truly want when it comes to digital services. Your customers might not be begging you for online account opening, mobile transfers and check deposits, online notifications, or any of a raft of other digital services available today, but that’s likely because they’ve simply found another bank that offers them. 

With little more than half of community financial institutions offering any of the above-mentioned digital services, the opportunity is enormous for those organizations that are able to get such services up and running swiftly and efficiently. To do so, you need to choose a technology partner with not only the right offerings but also a willingness to work with you to customize and support those offerings.

With the right technology partner, the journey to digital transformation doesn’t need to be treacherous or cost-prohibitive—but it does need to start now.

Ready to meet this unique moment? Request a demo to learn more.

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