4 charts

Where community banks stand in terms of tech and trust, in 4 charts

  • Community banks are still valuable in consumers’ minds.
  • Still, if these institutions want to stay relevant, they’re going to have to do some tech makeovers.

Email a Friend

Where community banks stand in terms of tech and trust, in 4 charts

Challenger banks are getting coverage for their growth and earnings, while big banks are getting attention for what they’re doing to up their tech game.

Meanwhile, there hasn’t been that much talk about what’s in store for community banks -– are these institutions slowly fading?

Not so much. It turns out consumers are still very much pro-community banks.

A report by MANTL that looked into consumer attitudes towards banking found much more positivity and trust towards community banks compared to challenger banks.

Even so, that doesn’t mean community banks can sit back, relax, and let the ‘challenger bank fad’ take its course – consumers want digital solutions, and community banks may need to boost their digital transformation tactics to keep customer interest.

Trust in community banks and credit unions is still strong

Community banks and credit unions seemed to have played a big role in helping consumers and small businesses through the pandemic. 

Almost 90% of small businesses believe their community banks played a role in their economic recovery – 26% said their businesses wouldn’t have survived without them.

Source: MANTL

Overall, consumers still believe in the importance of community banks, both in their role in helping economic recovery during Covid and helping serve the communities they’re in.

“Consumers and small business owners recognize that credit unions and community banks are critical to enabling nationwide resilience in three key ways: facilitating COVID-19 economic recovery, creating a positive local impact in communities, and expanding access to financial services and inclusion,” said Nathaniel Harley, CEO of MANTL.

The report also found that 92% of small businesses and 89% of consumers say credit unions and community banks are either just as important or even more important than larger national banks.

Challenger banks aren’t as hot in the SMB world as you might think 

There are a slew of new challenger banks focusing on SMBs and the narrative seems to be – SMBs felt like services were lacking in the traditional finance world so they rushed to the digital bank world.

But while there may be some truth to that, there’s still a lot of skepticism surrounding challenger banks.

Source: MANTL

That tale of the hyper-personalized challenger bank, for example, may have been a tad overblown. Only 8% of consumers and 5% of businesses see challenger banks as more personalized. Meanwhile, less than 10% of both businesses and consumers see challenger banks as being more trustworthy.

In terms of why challenger banks aren’t getting a lot of trust, Harley says one of the reasons has to do with a lack of bank branches. A lot of people tend to overlook the branch, but in fact, it plays a big role in establishing trust and approachability. 41% of consumers listed a physical branch near them as a top banking need.

“Similar to buying a mattress, consumers will often want the option of trying it out in-person and then will go home and complete the transaction online,” said Harley. “That is why community banks and credit unions must have competitive digital offerings and the ability to meet consumers and business owners where they want to do business – in-branch, mobile or online.”

Online account opening is now a must for consumers 

Digital services are more crucial than ever for consumers and that becomes especially apparent when looking at how they view online account opening. 

While less than 60% of community banks offer online account opening, over half of consumers and businesses say it’s a must for them.

Source: MANTL

Here is where challenger banks can gain the upper hand. As digital solutions become more of a priority in consumers’ minds, they’re more likely to switch to something new that values digitalization as much as they do.

“Neobanks generally offer sleek, seamless digital experiences and the data very clearly shows that consumers and small businesses alike are increasingly prioritizing and valuing digital offerings,” said Harley. “This should be a major call to action for community institutions to modernize to keep pace with rising digital expectations.

People and businesses are still curious about challenger banks

Challenger banks may not win in terms of trust, but they’ve been scoring some serious curiosity points. The report found that by mid-2022, half of SMBs out there are likely to open a digital banking account, as well as 47% of consumers. 

Source: MANTL

And when it comes to Gen Z-operated small businesses, the numbers may be even more noteworthy. 100% are planning to turn to a fintech company, according to the survey

Still, 86% of Gen Z-owned businesses are also planning on opening an account at a community bank or credit union. That means belief in community financial institutions isn’t a generational thing. Gen Zers may value digital capabilities more than their predecessors, but that doesn’t mean they value community institutions any less.

All this to say, community banks still have a shot – they just need to make sure they don’t miss it, says Harley. 

“The biggest threat to a community financial institution is not a neobank, or a large national bank, but instead the opportunity cost of not modernizing to keep pace with increased demands for digital banking experiences. It is now a matter of survival for any institution that has fallen behind the digital transformation curve.” 

0 comments on “Where community banks stand in terms of tech and trust, in 4 charts”

4 charts

The revenue potential of banking-as-a-service, in 4 charts

  • Many banks are undergoing digital transformation, but struggle to monetize their new infrastructure.
  • One of the ways banks could leverage their new digital payments infrastructure is through adopting a banking-as-a-service strategy, which can unlock new revenue streams.
Iulia Ciutina | May 04, 2022
4 charts

The evolution of lending towards a digital ecosystem, in 4 charts

  • In a new report, Marqeta outlined how the lending industry has evolved, and defined a new stage as Lending 3.0 - all about digital interaction, alternative data, and personalized underwriting.
  • The study highlighted changes brought about by this new digital lending ecosystem and how financial services providers are evolving with it.
Iulia Ciutina | April 22, 2022
4 charts

How non-prime risks are driving the growth in consumer credit, in 4 charts

  • The consumer credit market is showing more signs of healthy expansion, with record numbers of originations for credit cards and personal loans in Q3 2021.
  • This has been partly driven by subprime segments, as lenders have become more comfortable serving this category due to record low delinquency rates.
Iulia Ciutina | February 23, 2022
4 charts

2021 US fintech IPO review in 4 charts: Most stocks are starting the year in the red

  • Most public fintechs that IPOed in 2021 have their share prices down well in the double digits compared to their initial market offering.
  • Investors were betting big on fintech startups, but this confidence seems to be dying out.
Iulia Ciutina | January 11, 2022
4 charts

How younger generations are driving the recovery in consumer credit in 4 charts

  • When the pandemic hit, credit issuers tightened their lending criteria and focused more on serving prime consumers.
  • The consumer credit markets have since recovered, mostly due to younger generations, but the steep growth witnessed last year is expected to subside in 2022.
Iulia Ciutina | January 06, 2022
More Articles