Independent Banker - July 2019 - 20

PORTFOLIO
media and consumer goods, respectively. None of
these entities would particularly like to get into
the banking business. However, they are attacking
the fringes of banking solutions to provide a more
complete customer experience. Amazon is already
competing with rewards-based credit cards with
its Amazon Prime card.
Innovation Station
By Kevin Tweddle, ICBA
Keep these
competitors
in mind, too
A
s community bankers, we have grown
accustomed to competing on all fronts.
Whether it's systemically important fi nancial
institutions (SIFIs), credit unions or nonbank
fi ntech companies, competition has only grown
more fi erce. But they're not the only threats to
keep on your radar.
Beware Big Tech
Although it does not get much press, I believe
the biggest competitive threat to all banks is Big
Tech, also known as GAFA, or Google, Amazon,
Facebook and Apple. All of these entities have
very large digital customer networks in diff erent
primary businesses: search, retail shopping, social
20 Q ICBA Independent Banker Q July 2019
Kevin Tweddle
(kevin.tweddle@
icba.org) is
chief operating
off icer of the
ICBA Services
Network
Fintech
Many fi ntech companies are carving out niches by
building products and services for banks, but there
are still some fi ntechs that have chosen to compete
directly with banks. Many of these companies are
built on a 100% digital or mobile banking experience,
and many have roots outside the U.S., such as
Atom Bank and Revolut, both based in the United
Kingdom, and N26, based in Germany. While
these companies have not yet gained a foothold in
the U.S., they are only in the beginning stages of
their plans to launch their solutions. This process
has been slowed by U.S. regulatory requirements,
particularly as it relates to capital and profi tability.
Other fi ntech companies, like Quicken's Rocket
Mortgage, are attacking specifi c business lines
within banking. Quicken is not a bank yet, but it
and other nonbanks now represent approximately
half of all mortgages originated in the U.S. between
2008 and 2015, according to Home Mortgage Disclosure
Act data.
SIFIs and credit unions
Community banks can't compete with SIFIs'
multibillion-dollar technology budgets, but they
can compete by partnering with fi ntechs to help
improve and create solutions, and they can usually
take those solutions to market faster than large
companies. Credit unions use their built-in tax
advantage of approximately 20% to provide more
favorable pricing terms to consumers and, in some
cases, small businesses in their markets. These will
continue to be one of the more diffi cult competitors
unless legislative bodies level the playing fi eld.
So how do community banks compete? They
must continue to digitize portions of the customer
experience. Things like digital onboarding for
loans and deposits, fi nancial management tools
and quicker approvals are just a few ways community
banks can do this. By pairing that with their
human-centered relationship banking model,
community banks will stay competitive.
Independent Banker - July 2019

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