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How Community Institutions Can Fight The Megabanks

The banking industry pits a handful of big, multinational bank brands against everyone else — community banks and credit unions. It's a classic David vs. Goliath matchup that can sometimes feel like an unfair fight. Here's how smaller players can win when competing against giant-sized opponents.

Subscribe TodayYou might not think grabbing a bite at a lobster shack has much to do with banking, but you’d be wrong. In many ways, it’s the future of community-based banking.

The industry has changed drastically since 1990, when the five largest banks held less than 10% of all bank assets. Now they control 44%. These days, banking is a two-prong industry: megabanks and everyone else… and megabanks are taking over.

JPMorganChase, Wells Fargo, Bank of America and Citibank dominate. They open half of all new accounts — two-thirds of those opened by Millennials. Smaller institutions fight for what’s left.

From a community bank perspective, the Big Five banks are more analogous to the folks running Dunkin’ Donuts, Home Depot or Starbucks whose success is based on mass market distribution, super huge economies of scale and standardized products.

Smaller institutions should not view themselves as competing against these megabanks; it’s a losing proposition. Very few community banks and credit unions of offer anything remotely close to the same level of services that megabanks do — highly sophisticated financial services like M&A advice, global cash management or international loans.

Chain banks have the same laser-focused lock on their sales, marketing and distribution strategy as big box retailers. There’s no connection with the community, and minimal interest in the local economy’s well-being. They have no interest in tailoring packaged products for anyone or any market. Their cookie-cutter storefronts can be plunked down anywhere. Like most chain retailers, they are driven by quarterly profit projections and their stock price. Penalties for things like market manipulation, bilking customers and laundering money are simply part of the equation — the cost of doing business, baked into their business model.

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Once smaller institutions accept that they are competing against big box chains, it’s easier to plot a marketing strategy and go on the counter attack. Step one is engaging in a conversation with local businesses — the boutique restaurant, independent oil and lube joint, espresso cafe or sports store. Ask the owner these two questions: (1) “Why are your customers loyal to you when they could shop at national retailers instead?” and (2) “What’s your strategy for survival?”

They’ll likely include these insights:

  • Change perspective. View yourself as a specialty store that provides higher-quality products, deeper knowledge and flexible, customer-friendly policies.
  • Pamper customers. Cultivate a culture with warm, welcoming staff that goes the extra mile to keep clients satisfied, informed and happy.
  • Leverage your size. Innovate with new products, more convenient services, and keep your products freshness. You can be more nimble, flexible, responsive and pivot more easily than mega chain stores. You can turn on a dime, whereas it takes them months — even years — to adjust their direction by only a few degrees.
  • Capitalize on your sociability. Hold in-store events, engage in community activities, appeal to families — at the local level in ways national brands can’t/won’t. Think of it this way: most customers at big banks will use social channels to lodge complaints, while customers will engage with smaller institutions via social media because they care and they like you.
  • Convey your unique qualities online. Encourage customer endorsements and leverage influential Yelp reviews.
  • Think local. Focus on local needs, local products and filling competitive gaps. Partner with local stores and charities. Always be looking for ways to deepen your local roots, relationships and connections.

The strategies that small business owners use to compete against well-financed giants may be especially suited to smaller banks and credit unions as both groups find their competitive niche in a two-tiered industry: the handful of big boys vs. everyone else.

Smaller institutions can feel overwhelmed by the resources that megabrands toss around, but that hasn’t stopped a record number of 27 million entrepreneurs from starting their own businesses. With the right strategy, vision and plan, even an out-of-the-way lobster shack can find success and achieve tremendous results.

Kevin TynanKevin Tynan is Senior Vice President for Marketing at Liberty Bank for Savings. You can connect with Kevin on Twitter, LinkedIn or send him and email.

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The Financial Brand Forum 2017 | May 17-19 | Las Vegas


  1. Looking at the latest figures from JD Power’s Banking Satisfaction Index, the Mega Banks have officially won the customer satisfaction battle. The scores are 793 for Mega Banks and 791 for the Midsized category. Just three years ago, local banks had a 40 point lead! What has driven this dramatic shift? In the same period, Digital Banking has become the channel of choice for customers/members. Mega Banks have dominated that offering – currently leading the JD Power Index Digital Banking score by a sizable margin. The customer has spoken. If we want to beat the Mega Banks, then we need to pay the table stakes and get our Digital act together.

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