Fundamental for the development of local economies due to their proximity to customers and the businesses that surround them, community banks need digital and mobile tools to better serve users.

Community banks make up 99% of all entities in the United States. In one out of every three counties, they are the only financial presence, especially in remote and rural areas. They are more likely to lend to small businesses because they understand their needs and circumstances, and because they are often smaller businesses themselves.

These institutions have many strengths, including greater knowledge of their clients because of past interactions, which allows them to offer more personalized experiences than their multinational counterparts.

However, being located in small towns sometimes also means that they offer a limited number of products and services.

To strengthen their customer service and streamline their operations, these entities must have digital transformation tools at their fingertips to become responsive institutions 24/7.

WHAT ARE COMMUNITY BANKS AND WHAT DIFFERENTIATES THEM?

Community banks are small entities in the U.S. financial system that focus on providing banking services in specific locations. They have a long history of supplying loans to small businesses that are central to the life of a community, as well as to agricultural businesses.

One of the most important values of these banks is their proximity to users. Many managers are even accessible for face-to-face meetings, which generates trust and loyalty within the community.

However, a branch-based service is no longer sufficient to meet the needs and demands of customers, which, in terms of mobile and remote service, are similar to those expected from large banks in urban areas.

More than 2,500 community banks are over 100 years old, which demonstrates their ability to adapt to complex environments, historical events and new technologies.

For example, Blue Ridge Bank in Charlottesville, Virginia, a community of approximately 40,000 people, is focused on partnering with fintechs to quickly meet demand for savings and loans. With this in mind, last year it adapted part of its ATM network to allow the purchase and redemption of bitcoins.

Increasingly, community banks are also seeing opportunities in the creation of mobile banking apps and wallets that drive payments and e-procurement at small businesses.

NEW BUSINESS

The digitalization of community banks also makes it possible to explore new ways of offering financial services to make them more agile and convenient for the user.

In December 2021, a consortium of community banks launched Chuck, an open network that enables instant payments with the aim of competing with companies that offer fee-free transfers such as Zelle or Venmo. Spokespeople for the program said that peer-to-peer (P2P) transfers were just the first step in the “broad roadmap” they plan to enable, which also includes business-to-business payments.

The message is clear: technology is the fuel that is changing community banks’ offerings and the way they compete.

In this exploration of new businesses, Banking as a Service (BaaS) also represents an opportunity for community lending. BaaS makes it possible to offer financial products and services embedded in other companies’ applications, such as payments or credit on retail platforms. This technology also helps to extend the reach of these institutions by integrating them with other industries and attracting new customers.

A group of community banks, for example, recently created the BaaS Association of the United States to share their experiences with a concept that will continue to gain ground.

Community banks will continue to be at the center of their clients’ economic activities, stimulating the local population and fomenting entrepreneurship. Technology can only spur their growth to new levels.

Andy Tran