FinTech enables banks through collaborative relationships and partnerships to offer personalized customer experience, transform infrastructures, adopt open architectures, cloud computing, automated processes, data security & storage, and subsequently faster time-to-market. Quite a few large banks today recognize themselves as technology companies instead of service organizations. Community banks, though, have been passive in joining the FinTech disruption. Economic conditions created by COVID-19 are changing this scenario.
Community banking is a relationship-based business model. They provide traditional functions such as accepting deposits and providing business loans, mortgages, and credit lines and have less than $10 billion in assets. Personalized experience and customer satisfaction have been the key characteristics of community banks, two advantages that FinTech brought to typically-large banks. The partnership opportunity for FinTech and community banks is better processing capability and the technology to build and launch quickly. FinTech has made plug-n-play open architecture mainstream. While big banks leverage FinTech for agility and enhanced customer experience, community banks lag in technology innovation to adopt FinTech solutions.
The number of community banks has been shrinking over the last 10 years. The US had nearly 5000 (4,750) community banks in January 2020, and they hold about $3.2 trillion in assets. Community banks represent 97% of the US banking industry by count.
In the last three years, community banks have started engaging with FinTechs outside of regulators. E.g., Alloy Labs Alliance was set up in 2018 with over a dozen community and regional banks to explore FinTech opportunities. Alloy Labs’ members serve over 50 million customers, primarily small and …