A community bank or a niche bank is a digital bank that caters to a specific market or customer segment. They often have a personalized service portfolio accompanied by targeted marketing, tailored entirely to their customer base. Yet, niche banks or community banks provide banking benefits in the fullest sense. Most of them provide their customers with the basic financial services of commercial banks, including checking, payment, and lending. Niche digital bank customers can open saving accounts or go forward with deposits. So, for the most part, its size and coverage tell niche banks apart from the dominant, traditional houses.
The Scope of A Community Bank
There are several areas a community bank could focus on, for example:
- Specific Demographics: These institutions particular portions of the populace, like pensioners or young adults.
- Specific Industry: Community banks choose their product mix to meet the needs of particular industries, including offering loans and transaction facilities with a particular purpose of buying real estate/property.
- Specific Community: They could build up a community bank product to address particular communities, for example, local banks servicing the LGBTQ community, unbanked and underbanked people.
The Benefits and Opportunities of Community Banking
Opening and running a community bank or niche bank can help your Fintech organization in multiple ways:
- Community banks have a lower risk.
- Community banks may react better to changes in the market when compared to the big traditional organizations.
- They also have stronger brand loyalty with their specific target group.
The Niche and the NBFI
In the fintech world, we see another term for financial players, who often meet this criterion: neo-bank. Neo-banks are small banks that push into market opportunities that are often left out by their larger counterparts. So, does that mean niche banks and neo banks are the same?
Not at all. It’s true that neo-banks primarily target the tech-savvy, digital, and other preferences of the user. Neo-banks don’t maintain brick-and-mortar branches. The same applies to some niche banks, too, but not for all. However, niche or community banks are full banks with a limited or personalized scope, aiming at a specific customer persona with their particular needs.
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New Challengers for A Community Bank
That’s even more true regarding the digital types of banks that sprang up and established themselves on the online market in recent years. You increasingly hear the term challenger bank. It describes a bank that has a full-banking license but aims at digital financial products. No wonder challenger banks scale so quickly.
Digital banking is no longer something you do solely – it can be one of the services among many. Larger organizations have realized that they rely on an extensive customer base, and hence personalization needs to play a crucial role.
Compared to start-up banks, these larger banks have a much easier time promoting their financial services, offering them on the side. In a way, that combination of branding, personalization, trust, and marketing opportunity is not unlike the BowieBanc we discussed above. The difference is that Google, Amazon, or Apple have the condensed genius of top-notch software engineering behind them, ensuring that their products are useful and convenient.
More traditionally inclined community banks face the same peril as monolithic banking houses: E-commerce and digital payments bind a greater share of customers each year. So to find customers for their products, niche banks may not simply follow the old banking playbook, adapted from their bigger counterparts.
As a fintech software service provider and expert, we can help you get the software side of your bank on track. We are one of the best mobile app development companies in Dallas. In case you have any concerns about building your next e-wallet-based payment and savings applications, feel free to contact our mobile app company today.