Big banks dominate in terms of market share. However, this doesn’t mean that credit unions and community banks can’t compete. In fact, the dramatic collapse in trust in big financial institutions after the 2008 economic crash has had a major impact.
One study found that two thirds of Americans are still angry at the big banks, and that’s not taking privacy breaches, financial fraud cases and poor service into account.
This creates a great opportunity for smaller financial institutions. Let’s look at a few ways in which credit unions and community banks can compete with big banks.
Remind Them of the Financial Benefits of Doing Business with You
Almost eighty percent of those surveyed said credit unions don’t nickel and dime them to death with fees. Mention your low fees for processing payments for businesses or debit-card-only services. You can also stress your compliance with financial regulations. This capitalizes on the lack of trust in big banks.
You could provide support for startups. This could take the form of loans for small businesses that big banks don’t consider worth the effort. Or you may set up small business incubators, then advertise to the public how you’re promoting economic development in the community by fostering new businesses.
This is why community banks issue sixty percent of small business loans and eighty percent of agricultural loans. Or you could discuss how you’re willing to manually underwrite loans to get people rejected by the big banks into a new home.
Emphasize Your Community Ties
Emphasize local in your marketing efforts. This not only engenders trust, but allows you to showcase how doing business with you improves the local economy. You’re not just locally owned and operated, but the loans and services you provide benefit the local community. You’ll become more attractive to the 53 percent of the public that back institutions that are committed to the community.
Provide the Same or Better Technology Than the Big Banks
Just seventy percent of consumers surveyed said that credit unions and small banks offer products relevant to them. Yet credit unions and small banks offer the same financial products. Others think that these institutions can’t provide the same level of service. However, you can use technology to meet or exceed the service levels of big banks.
Offering things like remote deposit capture, or RDC, capitalizes on the customer’s desire for convenience, and it offsets your limited number of branches. Let people deposit checks by taking a picture of it instead of trying to reach a teller or drop the check in an after-hours drop box.
Recognize what digital services are necessary to retain and attract customers. For example, if you don’t have a mobile loan app, customers will go elsewhere. Real time deposits are valuable to your clients, while online bill pay is the new minimum acceptable level of service for financial institutions.
Fast online mortgage approvals and automated decision engines for loan underwriting will attract new mortgage customers.
If you can form strategic partnerships with financial technology firms to offer novel services to customers or just move classic services to an app so that people can apply for loans with their phone, you’ll have an edge over big business. This makes up for the fact that community banks don’t have the same native talent as either fintech firms or big banks.
Small banks and credit unions can do well in the crowded marketplace by leveraging their positive reputation and reaching out to under-served markets. It requires proper branding and leveraging technology, but it can be done.