It’s probably a bit of a stretch to say people need banks as much as they do water. But you probably haven’t gone a whole day without your bank for a while. So imagine not being able to access banking services quickly and efficiently.

After the 2008 financial crisis, that’s exactly what happened. “Banking deserts” were created across the U.S. as financial institutions adjusted to the new environment. It isn’t such a problem for urban areas, but some rural areas have been left completely deprived of bank branches.

This trend has been further amplified more recently by digitalization. In order to compete with fintech challengers, incumbent banks have been focusing on digital services at the expense of bank branches.

For community financial institutions, this trend creates an opportunity to thrive by reaching out to these communities by providing the local interactions people value alongside a seamless digital experience. Yet, to seize this opportunity, community banks and credit unions must continue to focus what made them successful in the first place, by putting local consumers’ demands at the heart of what they do and providing a more personal banking experience.

Community Banking Renaissance

As long as there has been money in the U.S., there have been community banks. Long before there were national and international banks, community banks played an integral part in the financial infrastructure.

To this day, community institutions provide vital services to locals, whether that be saving accounts or loans for families and small businesses. Their business model is built on having deep relationships with the communities they serve.

Yes, digital services are key, but community banks can provide services which neo-banks simply can’t, so there are opportunities ahead. To start with, the figures are promising for community banks as a whole with Q3 2019 revenues seeing a 7.2% increase, contrarily to national banks.

“Not all demographics want a digital banking experience… Yet mobile use among rural adults has been rising sharply.”

What’s behind this strong performance is open to debate, but there remain many customers who still depend more on personal interactions. Not all demographics want a digital banking experience because not everyone’s life revolves around a smartphone. In fact about 30% of adults in rural areas of the U.S. do not have a smartphone. Many banking customers still insist on meeting in person, particularly when they have the intention of securing a loan. For them, that face-to-face assurance is crucial in instilling trust. As major banks have gone digital, these people now rely even more on community banks, offering an opportunity — an analog bounce in a digitalizing industry.

Yet, the Federal Reserve found in 2019 that rural America is facing a string of branch closures as a result of banking services moving online. This trend expands the “banking desert” issue described above, and is affecting access to both cash and credit for local businesses and households. As such, there is a gap for community institutions to provide financial inclusion to areas which might have been left behind by Wall Street and Silicon Valley. After all, unlike community banks, these large institutions are faceless to most consumers and small businesses.

Be Digital-first, Not Digital-Only

Having said this, financial institutions of all varieties need to adapt to the 21st century — they cannot afford to be complacent. Recent research suggests that American consumers want digital and most won’t use a bank which does not have a mobile app. And to add to this, mobile use among rural adults has been rising sharply since 2011.

So, yes, that personal face-to-face engagement is important, but don’t forget about the interface-to-interface!

People are growing accustomed to the culture of ‘now’ — they don’t want to wait until their bank opens or walk up to a closed door at 4 p.m. on a Sunday. They want access as and when they need it. As such, banks need to provide the fastest, most frictionless way of engaging.

Community financial institutions need to find a way to crack digital in order to avoid their analog bounce giving way to a digital dip. The key to this, of course, is truly putting their consumers first with a seamless digital experience. After all, that is what neo-banks have been getting right.

You Can Digitize in a Lean Way

The challenge for most banks and credit unions is to remain profitable while remaining competitive. It’s a dilemma. You can’t get rid of a regional footprint but also need to become digital, for which you might have to cut costs. As a result, many institutions feel they do not have the capital or staff for big technological renovations. The million-dollar question for banks and credit unions is: Will investing in digital pay off? It’s a big decision.

Putting the money down isn’t the only obstacle. Community banks have smaller resources and less staff so, to digitalize, they need to hire because, unfortunately, one upgrade won’t cut it. Even if a bank fully revamps its digital services, this will swiftly go out of date so you need a team that is constantly updating the platforms. But, there’s a dire lack of technology talent. For example, if you are a digital rock star — of which there are few — you are much more likely to work at a major tech company in a big city.

However, being smaller could be an advantage, providing a proper strategy is put in place. Community banks aren’t encumbered in the same way big banks are so it is possible to digitize in a lean way. Fear of the cost is understandable. We’ve all heard rumors of banks spending billions on digitalization, but it can be simpler than that.

Digital Strategy Built On a Consumer-First Approach

To this day, community financial institutions have remained crucial to local finance because they have always listened to what their customers need. Yet, digitalization is an area a lot of community banks and credit unions have not figured out, and they must be wary of losing customers as a result of this digital deficiency. To rise to the present challenges, institutions must remember stick to these consumer-centric roots and reach out to those facing the threat of being left in a rural banking desert.

All in all, banks and credit unions can and must create a richer experience for their customers because, despite valuing strong personable relations with their bank, their local demographic now demand proficient online platforms. Implementing a digital strategy alongside their more personal style of operating will allow these banks to focus on other aspects of the business.