Community Banking and the Return of Relationships


Erinn Steffen

Senior Vice President, Insight

Some people would argue that 50 years ago, business was all about relationships. You shopped at a local grocery store, you picked up supplies from the local hardware store, and you probably banked at a hometown bank where all the employees knew you and your family by name. We felt a certain amount of loyalty to those local businesses, most likely something that was passed down from the previous generation. You had real relationships with the owners and managers; the connections were personal and meaningful.

Over time, however, larger national brands began to grow and we became enamored with the broader selection and lower prices available at the likes of Walmart and Home Depot. But in gaining the perceived benefits, consumers in general gave up those all-important relationships.

In the banking industry, acquisition and consolidation was the name of the game during this time. National or international banking groups scooped up many of the local and regional banks, counting on efficiency of scale and the ability to replicate products and processes from branch to branch to become more efficient. And that worked for a while.

What the banks may not have seen coming was the renewed interest from consumers in having a truly local or regional bank run by people who live in the community and understand the specific wants and needs of the neighborhood. As early as 2015, Fortune reported on a study that showed a 5% rise in local and community bank usage by Millennials, while larger banks saw a 16% drop from that group. Fees of the larger banks played a role, but Millennials are also doing more research and are quicker to switch banks in search of a better experience.

So what does it mean to emphasize a “relationship” in banking?

A recent article in American Banker said it well: “While consumers may no longer need bankers to assist with transactions, no amount of digitization will replace the friendly face offering knowledgeable advice.” Community banks need to step back and explore the ways they can connect with their local client base. They need to know what worries them, what excites them and what they hope to accomplish. These are the things that make a relationship.

Rockland Trust is a local bank in Massachusetts that has taken the importance of relationships to heart. The bank’s slogan, “Where Each Relationship Matters,” is at the center of its advertising campaigns and online presence. It recently launched a series of TV commercials that ask the question “What makes a good relationship?” The spots are convincing and real, showing that the bank really does value personal connections and loyalty.

Century Bank is another local Massachusetts bank focused on relationships. “Our Family’s Bank. And Yours.” defines the way it views its role in the community. One of the bank’s core attributes is “client relationship centricity,” a value that underscores its commitment to building and nurturing relationships that are good for the both the business and customers.

A third local Massachusetts bank is Randolph Savings, first opened in 1851. Today, the bank claims “Local management. Local decisions. Local commitment.” as its mission. With an emphasis on that local involvement and an ability to make decisions quickly to benefit customers, the bank is an active member of the communities it serves.

Does this interest in relationships and resurgence of community banks spell disaster for large national banks? Not at all. On the contrary, it shines a light on the opportunity for these banks to think differently about their businesses and how they engage with their local communities. With the right leadership at the local level, larger banks can enhance their community reputations and build important relationships. Local banks are doing it better right now, but consumers — especially Millennials — will be watching to see how banks adapt to new business models and increasing digitization.

At EMA, we believe that brands (banks or other businesses) are more successful when they build friendships with customers. It’s our corporate philosophy called Brand As Friend®. Ask us how we can help you make more friends!

Hey! Our name is pronounced Mōw-rrr, like this thing I’m pushing.

The PopUp Link