It feels like we live in a financial landscape dominated by megabanks with massive marketing budgets and nationwide branch networks. This makes it easy for community banks and credit unions to feel outmatched, but here’s the simple truth: smaller institutions hold a powerful advantage that no large bank can replicate.
Personalized service.
Recent articles have underscored this point by challenging the myth that size and scale are everything in banking.
Quite the contrary, in fact.
Service-oriented and relationship-focused strategies allow smaller FIs to compete—and win—by offering a differentiated experience.
Unlike the megabanks, community banks and credit unions are uniquely positioned to build deep and lasting relationships with their customers and members. These relationships are not based on algorithms or product bundling, but rather on human connection and an understanding of the local landscape. This is where big banks often fall short.
It may seem intuitive that the average consumer is more than a number; that they want to be seen, heard, and understood. But for all their budgets, networks, and platforms, big banks have yet to embrace the individual accountholder. Meanwhile, community FIs are equipped to holistically serve the needs of each customer/member.
So how can smaller institutions make the most of this advantage? By attracting the 10% of consumers ready to change FIs at any given time, which means doubling down on what makes them different:
- Train frontline staff to respond to life events with personalized financial guidance. Who can better identify and meet the needs of individual accountholders than a local institution staffed by local people? Where a large institution might route people through a phone tree or chatbot, community banks and credit unions often provide direct lines to real people living in the same community. Your frontline staff has the unique opportunity to learn the names of people who bank in-branch and connect them with the products and services they need. This personal approach fosters trust and loyalty in ways that one-size-fits-all service simply can’t.
- Use prospect data to craft the right message to the right people at the right time. Being top-of-mind when people are ready to switch is key. Since convenience is the primary selection criterion for prospects, you should focus your targeted marketing on prospects who live, work, shop, and drive near your branches. Once you’ve attracted them, you can use your superior service to cross-sell additional products and services while encouraging referrals.
- Offer customer-friendly products and policies. One of the biggest gripes people have with big banks is that they make banking a frustrating experience. This is by design: if nonsense fees and convoluted policies will ultimately boost a big bank’s bottom line, they won’t think twice (even if it involves a whole lot of attrition). Conversely, community institutions succeed by offering accounts that are easy to open and use, providing service excellence, and developing accountholder relationships for life.
Personalized service isn’t just a feel-good benefit—it has a real measurable impact. According to industry studies, customers/members who feel valued and understood are more likely to consolidate accounts, refer friends and family, and become long-term clients. That’s not just good service; it’s smart growth.
It helps that community financial institutions have a better understanding of local needs. Whether it’s a farmer needing a seasonal loan, a small business looking for a flexible line of credit, or a young family buying their first home, local FIs are more attuned to the specific economic rhythms of their regions. This insight allows them to offer solutions that are personal, relevant, and deeply appreciated.
In the end, it’s not about beating big banks at their game—it’s about playing your own and playing it well. Personalized service is your edge. Own it, amplify it, and let it lead your marketing narrative.