Beating the $10 Trillion-Pound [Banking] Gorillas

Sure, they may have nearly $10 trillion in assets between them, but any of the five largest U.S. banks can be cut down to size by your friendly local bank or credit union. Here’s how.

Big national banks have been stealing market share from smaller community banks in the U.S. for the last 20 years. The pace accelerated in 1999 when Congress passed the Gramm-Leach-Bliley Act which essentially created too-big-to-fail megabanks. Since that time, the five largest banks have doubled their share of domestic deposits. They hold 40% of all deposits — up from 19.5% in early 2000. On the other hand, small bank market share almost dropped in half between 2000-2013, going from 40.4% to 23%. The number of community banks during that period fell from 8,263 to 6,279 – down about 24%.*

Community banks seem at a loss to stop the hemorrhaging. Whatever tactics they’ve employed, the sales, consolidations and closings have continued.

My Advice: Take on the big banks and beat them at their own game.

Big banks have two significant advantages: technology and advertising. Using a combination of slick technology and heavy ad buys, they attract Millennials and Gen Xers. The combination also strikes a chord with higher-educated and higher-income individuals. Collectively, the strategy cuts a big swath of the marketplace. Economies of scale make the dual focus a cost-effective strategy that smaller banks and credit unions can’t match.

Instead of trying to fight head-to-head over electronic banking services with a mega-competitor — and losing each time — shift your battlefield. Launch a series of ads around your strengths and the perceived disadvantages of big banks, such as impersonal service, revolving personnel, national orientation, and rigid policies. Perhaps, you position an account number next to a smiling customer face, or a photo of a Wall Street bank next to your bank on Main Street.

If every community bank and credit union devotes one campaign a year to the downsides inherent with big banks, then the collective muscle of 5,000+ financial institutions, could deliver a withering series of punches that could redefine consumer perceptions.

The strategy starts with a little bank reconnaissance. Find the irritating factors that turn off customers at your closest big bank branch. Start with Yelp reviews to see what the public is saying. When a megabank account is transferred to your branch, probe the customer to see why they left. Shop the branch, open an account. Pay attention to their operating process and staffing. Are customers required to sign-in and wait or must they make an appointment? Can customers relate to the age of the bank officers on duty?

Read More: Who Are You Really Competing Against — Stealing Business vs. Defending It

Big banks are not well liked. Banks and credit unions of all sizes have higher likeability scores and are seen as more trustworthy. Leverage the factors that reduce these scores such as their perceived role in the 2008 prime mortgage debacle and subsequent recession. Compare the size of the bailout your local megabanks received next to your institution. Compare your reserves as a percentage of assets, next to theirs. Remind readers of the penalties they paid for improper banking practices.

Go local. Even big bank customers prefer to deal with a local bank. Emphasize your commitment to the community by establishing promotional partnerships with local retailers, charities and schools. Establish a retailer or charity of the month program. Work with high schools to create a high school basketball, baseball or football display using school colors and historical anecdotes.

Invest in social media. Facebook is built on friendly, local interactions which big banks will have difficulty executing. Focus on community and civic events, encourage employee postings, hold neighborhood photo contests.

Take every opportunity to accompany newsletters, ads and brochures with employee photos. It’s a great way to personalize your bank. In addition to being recognized by customers, employee faces will mirror the neighbors. Megabanks, however, use stylized photos that give off a Housewives of Orange County vibe.

Finally, target the underbanked. A million dollar account may get you some personal attention at JP Morgan Chase, but less than that and you’ll be relegated to self-service banking. ATMs, smartphones, bill pay, they don’t want you in their lobby. If you want service, make an appointment or sit down and wait. The big bank environment is not conducive to education and handholding, problem resolution or even socializing.

The underbanked – those with a banking relationship who also use financial alternatives such as check cashers or payday lenders — are ideal prospects for community banks and credit unions. Many are high income, working class customers. Shiny new buildings and automated cash machines can be intimidating. As they say in Cheers, everyone likes to go where someone knows their name.

As banks, credit unions and banking associations outline a marketing plan for the new year, pencil in a big bank marketing campaign. Set aside one month for pointing out what you do best — and highlighting the inadequacies of the megabank down the street. There’s a place for smaller institutions… and it’s not under their thumb.

(* All stats from the Mercatus Center at George Mason University.)

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