Community FIs rely on trust to beat out digital-only banks

Why the next 12 months will be critical for FIs competing with neobanks and fintech providers.

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Key points:

  • Digital-only banking options are growing in popularity as customers become more curious about personalization and new features.
  • Despite their growing curiosity, customers still don’t fully trust digital-only banking options.
  • Community banks and credit unions are already delivering the personalization and 1:1 support that digital-only options promise. 

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 for community financial institutions (FIs), and how forward-thinking leaders can navigate what’s next.

In this third part of our deep-dive series, we’ll be exploring how digital-only banks are attempting to capitalize on consumer demands for convenient, personalized banking, and what community FIs can do to retain their customers. 

More and more American consumers and small business owners are exploring what digital-only banks have to offer, and demand for these options is growing despite only 7% of consumers and 8% of small business owners saying they trust digital-only banks more than traditional financial institutions (FIs).

Even with this widespread lack of trust, traditional FIs are facing the challenge of staying competitive. They’re taking a hard look at their features, products, and customer service approach as curiosity about new banking options reaches an all-time high. 

According to our Banking Impact Report, 47% of consumers are “somewhat or very likely” to open an account at a digital-only bank in the next 12 months, while 43% of small business owners are “likely” to open an account at a digital-only bank in the next 12 months.

A financial graphic about opening accounts at banks.

While this data predicts an increase in digital-only bank customers over the next 12 months, traditional FIs can continue winning customers by more effectively offering what digital-only options aim to deliver.

As we take a deeper look at the data from the Banking Impact Report, we’ll uncover how community FIs can lean into certain advantages to compete with digital-only options. Not only do community institutions rank higher in trustworthiness, customer service, and community impact, but they also have more proven success offering the value that neobank and fintech providers promise. 

Let’s start with why customers look to digital-only options in the first place.

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