How Community Banks are Using Technology to Satisfy Customers and Win Market Share

Community banks and credit unions are highly valuable resources for the regions they serve. Local banks make a significant contribution to area economic growth while also offering consumers a more personal and responsive relationship with their banker.

Despite these very real benefits, community banks still face tough competition from so-called “mega banks” — large national and international financial services organizations (think Chase or Wells Fargo, for example). Because mega banks can use their size to create economies of scale and other advantages, community banks aim to be customer-focused, nimble and innovative to win market share.

With that in mind, let’s take a closer look at how today’s community banks are leveraging technology to satisfy their customers and win business from larger competitors.

Harnessing the power of Big Data

Businesses in virtually every industry are employing data analysis to optimize their processes and better understand their customers’ needs — and banking is no exception. By collecting more data and using advanced analytics to derive key insights, banks can deliver services that are precisely tailored and deeply relevant.

Here’s how the process works in the context of banking: By collecting and analyzing data, banks gain a window into customer behavior and preferences. For example, banks can track patterns that customers display (how often they make deposits, when they make deposits, how they make deposits etc.) and then offer services that are tailored to match this behavior.

Data analysis can also help banks identify opportunities that will benefit both the bank and the customer. If a community bank customer has an outside loan with a mega bank, for example, and the interest rate isn’t competitive, the community bank can use this information to offer the customer a new loan with a better rate.

Years ago, data analysis was largely the province of mega banks, as the technology was expensive and difficult to use. Today, however, cloud-based platforms put data analysis and machine learning-generated insights within the reach of virtually every bank. Community banks are seizing these new opportunities to create even more relevant and meaningful relationships with customers — something that’s already a strong suit of smaller banks.

Meeting customers on their terms via mobile and online offerings

Historically, banking has never been an industry where change occurs at a breakneck pace. That’s reassuring, as most people prize predictability and stability when it comes to their money and other assets. The last two decades, however, have been something of an exception, as the commercialization of the Internet and the development of the app economy have transformed the financial services sector.

This has been a serious boon for customers, who now enjoy a faster and more flexible experience thanks to online banking. The development of mobile banking apps, too, has helped make the banking process more accessible, particularly for younger customers, who have a decided preference for services delivered via smartphones or tablet.

Much like data analysis, community banks once lagged mega banks in terms of online and mobile options. Today, however, community banks are delivering seamless, full-featured online and mobile experiences to customers, giving them the flexibility and accessibility they want with the responsiveness and personal touch for which community banks are famous.

Why community banks are earning a technological edge

We’ve mentioned that, in years past, mega banks had an edge in terms of technology simply because they were the only organizations that could afford the costs associated with research, development and deployment. The introduction of ATMs, for example, was lead by larger banks.

Today, however, the costs associated with developing and adopting new technology has been lowered radically. Additionally, community banks are innovating faster than mega banks because they are far more nimble. Adopting a new technological initiative at a massive multinational corporation is kind of like turning an oil tanker around — it happens very, very slowly. Smaller banks can experiment, gauge customer response and quickly find out what works best.

Community banks, too, are often free of the enormous sunk costs that come with maintaining legacy systems. This gives them more flexibility to innovate, and to deliver the cutting edge services that today’s customers truly want.

The takeaway

Modern banking has become an industry that’s inextricably linked with data analysis and other emerging technologies. Community banks are taking advantage of their nimble nature (and reduced financial barriers to entry) to deliver innovative new products that customers desire.

That’s a recipe for earning greater market share — and delighting customers in the process.

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