Ordinarily, the community banking trends from 2020 would provide a glimpse of what’s to come in 2021, but to say the least, 2020 was an extremely unusual year. It was a year that altered even the most predictable trends, disrupted markets in every industry, and shifted the status quo.
Community banking trends provide a broad scope of the general direction for the banking industry, and it’s essential for your bank to consider them no matter how the winds of change blow.
Your community bank needs to stay in the loop of banking trends because banks play a central role in society, and we live in a continually evolving world. Whether changes occur quickly or slowly, they provide opportunities for your community bank to identify dangerous risks and valuable opportunities, enabling you to act at the earliest opportunity.
We’re reviewing four of the top community banking trends for 2021 to keep you informed and ready to take action.
The Top 4 Community Banking Trends for 2021
1. Being seen as relevant by consumers.
If there was ever a time that community banks had an opportunity to step up, it was undoubtedly in 2020 after the pandemic forced shutdowns globally. Community banks stepped up to the plate with a greater variety of digital services for making deposits and transfers and facilitating online bill payments and mobile banking. They also assisted their customers by facilitating Paycheck Protection Program loans to small businesses.
As things began to open up, community banks re-opened their doors. They gave consumers a greater comfort level with coming into their banks by stepping up their hygiene and sanitization protocols and implementing social distancing measures.
Recent studies show that younger consumers and wealthy consumers now vastly prefer virtual banking and that mobile banking is almost as popular as online banking. Digital wallets, voice for banking, and digital bill management are also popular services that consumers are taking advantage of since the pandemic started. Such trends are likely to continue in the near future.
Overall, community banks that responded quickly to the trends leveraged a vital opportunity to demonstrate care and compassion for their customers.
2. Opening up opportunities for fintech collaboration.
Technology has advanced to the degree that software programs can easily share data and work together seamlessly. Banking consumers, particularly younger generations, place value on tools that easily dovetail and integrate with each other. The younger sect enjoys and appreciates the convenience such tools provide. All generations are likely to see the same value in integrating traditional banking products into other useful tools in the future. For example, Google, Credit Karma, Acorn, and Chime provide branded banking services to allow consumers to invest or save money or make payments to family members, friends, and others.
Community banks typically don’t have the financial resources to innovate and test new tools and strategies. For example, JP Morgan Chase invests $11 billion in technology every year. As an alternative to spending massive sums on technology experiments, community banks can leverage fintech partnerships to offer relevant and innovative services.
Fintech partnerships benefit both parties. As a word of caution, community banks need to be aware of their role in the partnership as not to lose their customers to the new partner. Also, it’s wise to consider the potential risks of a partner company selling acquired customer data to a third party or using it to create products that eliminate the community bank from the equation. In any partnership, be sure to cover these and other critical details in establishing contracts.
3. Adopting a universal banking strategy.
The user experience is a crucial consideration when delivering any service, including banking services. Younger, digitally native consumers expect community banks to set up tools and processes so they can engage using any channel and complete transactions in a single interaction.
To ensure a stellar user experience, many community banks are instituting universal banking using online programs and call centers. Customer relationship management programs (CRM) are a vital tool for gathering customer information and delivering the kind of customer experience your clients want, and quite frankly, what other community banks and big banks are already delivering. CRMs are the key to utilizing insights to create cross-channel experiences, increase engagement, and get valuable customer feedback.
Despite having access to a wide range of digital banking tools, consumers sometimes want that human touch. Community banks will need to strike just the right balance between high touch and high tech to stay competitive.
4. Continue evolving the community bank business model.
The community bank branch model has been a staple of the industry for some time, and it’s been working well except for one thing – the expense of operating branches. As community bank customers transition toward digital and online services, they naturally visit their bank branches less often. A decline in counter and drive-up customers should signal community bank directors to evaluate how to reinvigorate loyalty from customers with fewer in-person interactions.
From supporting local baseball teams and charitable causes to advising nonprofits and educating the community, community banks are the backbone of many communities, and that’s a trend that isn’t likely to change.
While small local businesses have long histories with community banks, they often patronize larger banks for services that community banks don’t offer. Community banks can bridge the gap by better understanding the types of services that small businesses need and implement services to prevent small businesses from seeking bank services elsewhere.
By reviewing the past and current community banking trends, your bank will be better able to stay focused on its customers and community. Without question, the landscape of financial services is evolving rapidly. Community banks can quickly drop from consumers’ “go to” choices to the bottom of their list in these uncertain times. That’s no small thing considering the number of banks with assets under $500 million decreased by about 70%, translating to the loss of around 7,600 banking institutions.
Implementing a BoardEffect board management system is one tool that can help your board streamline its activities to help your community bank remain relevant and responsive to consumers. Board management systems are a trend that provides a secure all-in-one platform for managing all board activities from board meetings to committee work and post-board meeting collaborations, and board management systems are another trend that’s here to stay.