The simple genius behind fintechs and how community banks can compete


At this point, predicting the downfall of big banks is practically a cliché. Their demise has been forecasted for years, but it wasn’t until the 2008 financial crisis when cracks really started to appear in their foundation. Fintechs were around, but their use was still somewhat of a novelty and didn’t appear to be a match for the established giants. Fast forward to the present where the leading brands may give financial CEOs a few sleepless nights.

Dozens of the biggest players are set to reach a $1 billion valuation this year – a feat that would have seemed impossible a generation ago. Looking at some of the top companies, it’s easy to see how their value skyrocketed so rapidly. The Collison brothers formed Stripe to help small online retailers with payments, Avant gives average folks loans and Gusto provides HR for under-100 employers. In short, the billionaires made their buck serving those that large banks can inadvertently miss. In this way, they’re not unlike community banks, whose people-first philosophy is akin to the emerging tech giants.

The next step for fintech

Ironically, savvy fintechs are now capitalizing on their popularity to become more like big banks. Using their already substantial customer base, companies like Robinhood are now expanding to offer additional financial services. It’s a smart move for the profitable team who first began as a commission-free brokerage. Users are already highly engaged and seeing a huge chunk of assets transferred from traditional institutions to these fan favorites in the coming year will be no surprise. After all, who wouldn’t want to consolidate with a platform they actually like using?

The opportunity for community banks

With the unstoppable growth of fintechs, what’s a small bank to do? Because customers seem to be increasingly open to alternative financial solutions, there can be opportunity for these institutions to grab a piece of the pie – if they consider focusing on two major areas:

  1. Global trading
  2. Digital capabilities

Since their creation, community banks and member-owned organizations have offered many of the same services as their competitors. However, unlike fintechs, these financial institutions shave already proved their resilience. They too suffered through the financial crisis, but weathered the storm considerably better than large corporations who had five-times the failure rate. Community banks smartly positioned themselves as behind-the-scenes partners with burgeoning tech giants Square, Stripe and Robinhood.

Global is the new local

Why then, hasn’t either group exploded in popularity in post-recession years? Aside from the obvious technical advantage of fintechs, both big banks and start-ups have strong global capabilities. It may seem like the typical community banking customer would have little to do with international transactions. But across the world, foreign payments are incredibly common – and growing. Global trading is now an inescapable part of everyday consumer life, with cross-border shopping, travel and investments conducted daily with ease. Small businesses are now just as likely to sell to a neighbor as they are to a stranger halfway around the globe. Even staunchly conservative portfolios may be incorporating at least some foreign holdings.

Innovation as necessity 

Enabling global trades on a seamless digital scale is one of the best methods for both community banks to help expand their value and ensure continued relevance. Because of the long list of requirements needed to facilitate international transactions, the practice has long been dominated by bigger banks. Tackling complex regulatory environments and infrastructure can be not only intimidating, but downright impossible for those without an endless supply of capital for such investments. But today’s Amazon-induced customers, who are accustomed to one-click capabilities, might be less-than-patient with those who cling to telephone or in-branch-only transactions.

In fact, while customers prefer community banks for their personalization and customer service, they flock to big banks for their digital capabilities. This makes it all the more urgent for smaller operations to expand. Consumer loyalty is fickle and while they may have a current advantage, their hold is tenuous at best.

Even as big banks pour billions into digital upgrades, an easy path forward for smaller organizations is to partner with an established service and offer competitive global banking functions. Not only does this help to save money, but it also allows institutions to launch new services more quickly and recapture customers who may be performing these transactions elsewhere.

As Fintechs continue to expand their influence and increase market share, innovation is not just a path to success – it’s a survival mechanism.


Stephen Kuhl, CFA

Stephen Kuhl is responsible for Financial Institutions and Strategic Partnerships for Western Union Business Solutions, including the portfolio of community banks, credit unions and their affiliated universities across the United States. Steve has twenty-five years’ experience in capital markets, foreign exchange and international finance. Prior to Western Union Business Solutions, Steve was responsible for client management, digital acquisition and foreign exchange trading groups at American Express FX International Payments. In addition, he has served as the head of global banking at First National Bank, the largest privately held bank in the U.S and was the Managing Director of Global Risk Solutions for Travelex.

Steve is a Chartered Financial Analyst and holds a B.S. in Finance and M.S. in Economics from the University of Nebraska. Steve has served as an adjunct faculty member with Creighton University’s College of Business, teaching undergraduate and graduate subjects related to international financial management.