The future of community banks in a global economy

Critical for underserved communities

Hans Tesselaar is CEO at BIAN (Banking Industry Architecture Network) – a collaborative, not-for-profit ecosystem formed by leading banks, technology providers, consultants and academics from around the world. He believes that despite the speed at which global banking is evolving, community banks have an important role to play. In areas where digital adoption is not common, access to physical services remains a priority, says Tesselaar, pointing out that fintech and banks must continue to think outside the box, innovate and develop other initiatives aimed at those reluctant to embrace digital banking alongside the role community banks will play.

“Community banks will be crucial to ensure underserved communities have access to financial services as the popularity of digital banking increases. As fintechs and banks continue to accelerate their digital transformation in response, the closure of several high street banks is putting personal banking out of reach for many.”

Tesselaar outlines the importance of recognizing that not all consumers are willing or able to make the digital change, and there will always be those who prefer to tap manually. “This is where community banks can provide practical support at branches for those who cannot access digital services at home. Not only does this help improve accessibility and increase education around digital initiatives, but it also encourages people to embrace digital ways of banking on.”

According to Tesselaar, industry and regulators prioritize community banking to provide for those who prefer to bank in person. “ONE pilot agreement has recently launched for banks to share services to support communities and the future of cash. If a bank provider closes a branch, it must assess how the branch was used by the local community. The assessment may recommend that a shared branch be opened in the community, or that a post office be upgraded.

Tesselaar says: “In addition to this, Britain’s Financial Conduct Authority has the power to ensure communities across the UK have access to cash and banks that fail to comply can face fines, demonstrating the need for community banks in certain areas.”

A challenging time for fintech

But there are challenges associated with offering services as innovative and ground-breaking as current fintechs and larger banks. The costs of the transition to digital services alone have meant that older community banks have been slow to adopt new practices – putting them behind the curve when it comes to customer expectations.

“To provide a truly personalized experience that caters to all customers in the community, these banks must overcome obstacles around interoperability,” says Tesselaar. breed for each application area. By translating each proprietary message into one standard message model, communication between different organizations is therefore significantly improved, ensuring that every solution – inside and outside the bank – can seamlessly connect and exchange data.”

He suggests that community banks should also form an ecosystem with their peers, along with fintechs, service providers and aggregators, helping them in the speed at which they can introduce new products, which in turn will support the customer experience.

An effective ecosystem strategy, he adds, will mean these banks can serve their customers better, creating an opportunity to drive better experiences by offering the speed, scale and differentiated products that take advantage of the opportunities presented by the significant shift to digital banking. . “If community banks fail to take this approach, they will struggle to survive as they must remain competitive as consumers continue to demand new, digital services tailored to their needs.”