David vs. Goliath: Community vs. Traditional Banking
Would you rather choose a bank that is built on trust and knows about you personally, or a big famous bank known for its state-of-the-art technology, services and products? More people would generally choose the latter option, and there is nothing wrong with it. We all like to feel safe and secure when it comes to our monetary actions and choices, and the bigger traditional banks do offer all this. But personalization, and especially ‘trust’, is slowly becoming the more advantageous factor in banking needs.
Think about this, would you leave your money in the hands of someone you trust, or would you give it to a stranger who is sitting behind a counter? Here is where you would preferably like to choose the former option.
What’s the basic difference between traditional-large banks and community banks?
“The typical characteristics of a large bank mean that they will cover a specific geographical region and have assets in excess of $1 billion”. Whereas for Community Banks “the guideline is usually that [they] are deemed to have under $1 billion in assets.”
How are Community Banks giving Traditional Banks a run for their money?
Community banking is built upon trust (which is basically the business model), and the relationships between the people of the same community. Trust is insurance, developed between a customer, a local community member, and the community bank itself. These banks are locally owned and offer loan support for local communities and local businesses. This also ensures that the local economy of the community stays strong. When a local Community Bank is operative, generally people of the community choose it rather than going towards a traditional bank. Not only because of the trust factor, but also because they have a greater chance of acquiring a loan, getting better and more personalized services, and knowing that their queries will not go unanswered. This is where traditional banking method is being challenged by community banking.
An article on the subject highlights one of the major cons of traditional banking, when it comes to customer experience:
A 2015 study by Consumer Reports suggested that one of the major downfalls of big banks is that they don’t understand customers’ needs or and don’t provide personalized service. According to the survey, the four mega banks — Bank of America, Chase, Citibank and Wells Fargo — which hold approximately 40 percent of all U.S. commercial bank assets, landed in the bottom fifth of the customer satisfaction rankings. Smaller financial institutions have a smaller demographic, but this seems to help them gain insight into who’s banking with them and what those customers want.
Community Banks also tend to retain their employees for a longer period of time than traditional banks, which means that they build longer and stronger relationships with their customers. This ultimately ensures that the experiences that customers get from their community banks are more memorable in the long run.
Initially, Community Banking was not adopted readily on a considerable scale, as traditional banking still has better and more widespread technology and services. But now, community banking is making a name for itself when it comes to exceptional banking experiences, particularly in providing seamless technological services. Traditional banking services is being taken over by online banking, and community banking is also moving towards online services.
So what is the major difference that one can get out of this informative piece?
With a traditional bank, you bank with the bank itself. With a community bank, you bank with the people.