Ripe for Picking

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Community banks still have untapped opportunities to win over many more new consumers

By Gabe Krajicek

Community banks still have many ripe opportunities to win over new customers, especially millennials and disgruntled megabank customers, according to a new consumer study.

The Consumer Banking Insights Study—conducted online by Harris Poll on behalf of more than 200 community financial institutions offering BancVue’s Kasasa brand of checking accounts—found that while roughly half of megabank customers (46 percent) say they don’t feel very loyal to their current bank, 63 percent say they have never considered opening a checking account at a local community financial institution.

In fact, more than half (58 percent) of megabank customers don’t believe their primary bank has their best interests at heart, and 42 percent feel their bank charges them too many fees. By contrast, an overwhelming majority of community bank customers express satisfaction with their financial institution, with 96 percent saying they trust their bank and 85 percent reporting that they feel very loyal toward their institution.

Additionally, while 72 percent of Generation Y adults (those 18 to 34 years old) say banking locally is at least somewhat important to them, roughly one-quarter of Gen Y adults who don’t use a community bank (23 percent) say they don’t believe a community bank or credit union will offer the same benefits they’re getting at their current bank.

These survey findings aren’t novel news to community bankers. They know the advantages of their business model to consumers. But a pivotal question is: How can community banks convince megabank customers and members of Gen Y to make the switch? Increased marketing efforts and more sophisticated product offerings are important to winning over today’s new consumer.

Branding is particularly important to megabank and Gen Y customers, with 83 percent and 81 percent, respectively, saying a recognizable brand name is at least somewhat important to them when choosing a bank. Gen Y adults also place higher importance on online banking, rewards programs and cash-back options than other generations, while megabank customers rank ATM availability and mobile options more highly than community bank customers.

“Co-opetition” can help community banks boost their branding. By teaming up and sharing their resources with other community banks, some community banks have used co-opetition to scale their marketing efforts, allowing them to better compete with the megabanks in their area. The effect is similar to that of marketing a local restaurant row—where participating eateries work to draw more customers to a particular retail area to allow them to compete among each other for the additional new business they created.

Partnering with a third-party provider can also help community banks strengthen their branding efforts and offer their customers more services, like nationwide ATM refunds, as well as megabank-like products, including rewards checking accounts and mobile financial tools. Nearly one in four (23 percent) megabank customers say they’re at least somewhat likely to switch their checking account to a community bank this year, but community banks will need to find ways to improve their marketing efforts and product offerings in order to make that switch happen.


Gabe Krajicek (gabriel.krajicek@bancvue.com) is CEO of BancVue Ltd. in Austin, Texas, an ICBA Preferred Service Provider offering community banks a nationally branded rewards checking account program. Since joining BancVue in 2005, he has been instrumental in launching the national Kasasa brand of rewards checking accounts. Most recently, he received the 2011 Ernst & Young Entrepreneur of the Year award for Central Texas.

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