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Is 2019 the Twilight For Community Banks?

February 6th, 2019

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Technology may be sounding the death knell for community banking.

With 50% of the branches in the U.S., local and regional banks should be gobbling up new deposits. They're not. They're not even getting what might be considered a proportional share, settling for a mere 20% of deposit growth over the last three years.

Contrast that with the nearly 50% of new deposits that went to the three largest banks -- Bank of America, Wells Fargo and JPMC -- just last year. The three have only 24% of the nation's branches.

In another discouraging statistics for smaller banks, their loan assets shrank in 2017 by $30 billion. Meanwhile, digital lenders and direct credit investors saw their portfolios boom.

Accenture says fintech is largely to blame for the challenging environment community and regional banks are in.

Suggesting this could be "The twilight of U.S. community banking," Accenture included it in its list of the Top 10 Banking Trends For 2019.

By no means a certainty, the brief analysis suggests improvement -- meaning growth -- won't come easily or cheaply. "Being small and local isn’t the competitive edge it used to be," says the report.

The reason is obvious: Online banking is simple and convenient. With the proliferation of debit cards, digital wallets and cash-back credit cards, even handy ATMs are not a big consideration when choosing a financial institution. Online banks don't require a brick and mortar visit to open an account, assuming they even have a physical location.

"The new challenge in 2019 is to figure out how smaller banks can offer better digital services without spending billions of dollars," says Accenture. "If they can’t, they will continue to lose customers to their bigger competitors, and 2019 may see us enter the twilight of the community banking era in the United States."

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