Traditional banks and credit unions focus on a page from the challenger banks’ playbook niches stand out from the crowd of competitors.
“Brands are typically most effective when tied to an affinity,” said Sam Kilmer, fintech practice leader at Cornerstone Advisors. “That doesn’t mean you can’t create value by being generic and serving everyone in one [certain] Postal code. But if you create a category that’s small enough and unique, it’s yours.”
Some traditional institutions like Silicon Valley Bank and City National Bank have niche roots, as do startup founders for SVB and entertainment industry professionals for City National. Others, like KeyCorp in Cleveland and Needham Bank outside of Boston, have made newer plays to attract specific audiences, such as medical professionals in Key’s case or cannabis companies in Needham’s.
Banks rely on technology to serve sections of the population. This may include acquiring or partnering with a fintech company or using software that will help scale an emerging business. The benefits of catering to a niche can include dominating an emerging market like cannabis before it gets too crowded; to become the expert of choice in a risky sector like gambling, which most other banks avoid; or simply grow in size without setting up more branches.
“You can break free from geographic constraints and expand with virtually no physical footprint,” Kilmer said.
PwC’s 2021 Digital Banking Consumer Survey agrees. “We believe that for most banks…pursuing a clearly defined niche of customers with a relevant offering regardless of geography is not just a useful defensive strategy, but an opportunity for growth,” it says.
Here’s a closer look at five niches traditional banks have jumped into and how they’re using technology to thrive.