High Trust in Community Banks Creates Industry Opportunity

As we continue our work with community banks, we’re finding that one-on-one service and customer face time are more important than ever to banking customers.

This is reflected in a staggering statistic: according to the Chicago Booth/Kellogg School Financial Trust Index, consumers trust community banks almost two times as much as national banks. This has been true anecdotally for us as well; our smaller financial clients keep relaying that a large portion of their new customers are transplants from national banks. And based on industry perceptions of these types of banks, we’re not surprised.

The Index shows that trust in national banks has held steady at 28 percent since September 2012. However, the trust in community banks and credit unions remains much higher at 56 percent and 61 percent, respectively.

Chart of Trust oi Banks

The negative press that the large banks have been receiving continues to fuel the mistrust. However, it’s not all the negative attention that is driving the customers to the local banks. What we’ve heard from customers who use and love their local bank is that these banks are all about service, service, service. This has been enough to keep customers banking there, and referring their friends. Many bank services are done locally, with people who understand the market. These bankers find custom solutions to fit their clients’ needs, because they can be more flexible than a large bank. Not only do they understand the market, but having these services all in one area helps speed things up and gets the customers through quickly.

When a customer comes to the bank, the teller knows their name and creates a sense of community. However, as the relationship develops with a specific banker, the loyalty stays with the banker, and not just the bank. We’ve heard that many of the customers are prone to leave if their banker they know and trust leaves the bank. They are expecting the bank to take care of their employees, to keep them happy and encourage career longevity.

The current market continues to support local, community banks with a great opportunity to steal share from their larger competitors. There is the marketing opportunity to showcase the local bankers that deliver such great service, and make their customers feel right at home.