The COVID-19 pandemic brought with it financial challenges that could have meant the end for many small businesses. But, thanks to the tireless efforts of community financial institutions (FIs), countless small businesses were able to keep their doors open and their employees paid during these difficult times. A vast majority (88%) of small business owners agree that community FIs played a key role in economic recovery.
But, in practice, how did community FIs create resilience for their members? This article reveals three key insights garnered from the 2021 Banking Impact Report on why and how community institutions proved themselves to be essential for economic stability in a challenging landscape.
Three key insights from the 2021 Banking Impact Report:
Long before the pandemic began, both commercial and retail members depended on community FIs to support them and their region. When the pandemic surfaced new economic challenges, this trust was put to the test and proven to be well placed.
About a quarter (26%) of business members, on average, would have gone out of service during the pandemic had it not been for the support provided by community FIs. Not only were community FIs the most common source for PPP loans, but they also had the most satisfied customers during the pandemic when compared to large banks (61% vs 41%).
The community FIs that made the biggest difference to their members during the pandemic were those that offered timely services, products, and features, despite having fewer resources than larger FIs. Many community FIs also bolstered their commitment to digital capabilities and led the charge in distributing PPP loans.
Moreover, compared to larger institutions, the 2021 Banking Impact Report found that community FIs are more generous with their financial contributions to local communities, as 41% of community FIs reported giving back up to 5% of their annual revenue.
Despite the importance of community FIs, as proven by the pandemic, their survival isn’t guaranteed. Competition is increasing and some community FIs are falling behind in the race to offer digital banking services.
Digital banking options help community FIs deliver the services and products that foster greater resilience. Features like omnichannel offerings and online account opening enable community FIs to meet members where they are—or in the case of a global pandemic, where they are forced to be.
Members are now acutely aware of the role that community institutions play in fostering resilience. This awareness is quickly transforming into expectation, and community FIs who fail to meet this expectation will struggle to attract new members—particularly as more people factor FI community contributions into their buying decisions.
Put simply, fostering resilience for both your community and your members is essential to future-proofing your institution.
Nathaniel Harley is the CEO and co-founder of MANTL. A serial entrepreneur with a background in finance, Nathaniel founded MANTL to help community financial institutions thrive through digital transformation.