The financial services industry has been rocked by volatility over the past decade, with regulatory whiplash, rising and falling interest rates, global crises like COVID, and nonstop fintech disruption. Large financial institutions, with their massive scale and complex systems, have had to scramble to keep up. 

Meanwhile, many small community banks have also had to adapt to survive. Their size and focus give them an edge in customer relationships and local market insight. Thriving community banks are succeeding by doing what big banks often struggle to do: staying nimble, personal, and efficient.

So here’s the question: can large financial institutions learn something from the little guys? The answer is yes. Let’s explore exactly how the community bank playbook can help big banks better serve their customers and stay competitive in a chaotic environment.

Understanding the community bank mindset

To identify key lessons from successful community banks, it’s critical to understand what makes them successful. Community banks excel at being close to their customers and offering highly responsive service, which is something that larger institutions often can’t match.

Proximity to local needs and engagement with the community foster strong relationships and allow these banks to remain focused on their core strengths, such as supporting local businesses, providing personalized financial solutions, having a sharper understanding of the local dynamics, and maintaining a stake in the success of the local economy. Each of these strengths supports the local community and customer in a custom-fit way, inspiring loyalty and making customers feel heard.

Because they lack the scale of bigger banks, community banks must compensate with focus and skill to stay competitive. In fact, our research shows that winning community banks disproportionately invest in personnel and concentrate their resources in targeted markets. This supports the higher level of service and community engagement that makes successful community banks thrive.

How financial institutions can learn from community banks

What’s the lesson for large financial services institutions? The impact of putting the customer first.

Larger banks and financial firms may not be able to shrink themselves into the trimmer structures of community banks, but they can certainly borrow a page from their playbook. 

By streamlining processes and embracing a culture of adaptability, larger institutions can respond quickly to changing customer demands just as their smaller counterparts do and inspire the same level of customer satisfaction and loyalty. It’s all about keeping bureaucratic chains from weighing you down and enabling staff to be responsive and innovate to meet customer needs. 

After all, in financial services, the future belongs to those who can quickly adapt to changing market conditions, solving pressing issues and driving delight for customers. 

Putting the customer at the center of your business strategy

The first step is adopting a customer-centric view. Taking that first step is often the most difficult part, and financial institutions that embrace a customer-first mindset are those that will set themselves apart in a crowded market. However, you can’t stop with just the mindset. You need the right strategy to infuse the customer focus into each part of your business.

To start, consider these three strategic areas where it pays to harness this customer mindset into your strategy:

1. Digital transformation: Digital tools, data science, and AI are critical areas that can support the acquisition, deepening, and retention of customer relationships. Whereas community banks may depend solely on human relationships, larger organizations have the ability to leverage new technical tools to support their human interactions, develop greater customer insight, and deliver on a high level of personalization. The key is focusing on the right customer segments and high-impact areas for the customer as you institute these programs. 
2. Operational efficiency: Rethink the traditional banking model to streamline operations. Leaner structures that eliminate unnecessary layers of bureaucracy can supercharge decision-making and enable you to keep up with customer expectations. By prioritizing quick decision-making in areas such as underwriting and responding rapidly to customer requests, banks can retain and grow client relationships and deliver superior service to their customers. 
3. Target market refinement: Community banks have demonstrated how they can drive success by concentrating on market segments where they can achieve visibility and meaningful concentration. While that may be necessary due to budget constraints, it enables them to better connect with their markets. Larger banks must similarly be honest with themselves about where they can achieve true competitive differentiation — with customer segments, product markets, and geographic areas. Be open to assess and respond to what internal and market data are revealing, and make the tough decisions when needed to ensure your offerings line up with what your customers and markets need.

Consulting 2.0 in action for customer-focused financial services

With the Consulting 2.0 model, financial institutions can quickly access the specialized expertise needed to design and implement customer-centric strategies that drive meaningful impact. With access to Catalant Experts who bring hands-on experience in everything from refining customer value propositions to redesigning service models and operating structures, financial services organizations are better equipped to adopt customer-focused business strategies and tackle market challenges head-on without falling behind.