Consumer Preferences for Community Banks

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Small Bank Preferences

Reasons why a customer may prefer the services of a small bank rather than a large bank include face-to-face service, low costs, easy banking, community relations, local knowledge, varied offerings, and access to deposits.

Face To Face Service

According to the Find A Better Bank website, face-to-face service is one reason why some banking customers prefer a small bank rather than a large bank. Customers "value banking with a real person" because of better communication and the opportunity to create relationships. The Find A Better Bank website also reveals that building a face-to-face relationship with a banker is especially helpful "if your needs are more complex or immediate."

Lower Costs

Larger banks often include hidden fees in their service, whereas "fees are often lower at small institutions", according to The Simple Dollar. This may not be the case with every small bank, however, and The Simple Dollar also recommends that customers "identify your banking needs and compare fees for the services you need." According to a 2019 article written by financial planner Justin Pritchard for The Balance website, small local banks often offer free checking accounts and "waive fees if you just agree to receive electronic statements." The article also notes that small banks "compete with attractive rates on savings accounts and loans."

Ease Of Services

According to US News, small banks are generally "quicker to pass higher rates onto savers." Small banks also offer increased ease of services because staff at small banks often work with the same customers, allowing them to develop relationships and to better tailor bank services to customers.

Community Relations

Small local banks are a part of their local economy and often give back to the community, according to The Balance website. Local banks often "contribute money or other resources to help make local events a reality." According to The Financial Brand, money deposited into community banks "will be reinvested in ways that drive local economy", which can encourage customers to choose local bank services over large national banks.

Local Knowledge

Small banks may be easier to work with because of their knowledge about local areas, according to The Balance. Loans are an example of this because "megabanks might be unwilling to fund your local business", while local banks may be more understanding.

Varied Offerings

According to The Balance, some large banks only offer basic service options, while small banks "can offer everything from checking accounts to merchant accounts to wealth management." The Find A Better Bank website reveals that this disparity in services offered between large and small banks may be because large banks try to keep costs down by limiting service options.

Access To Deposits

Small banks often have an advantage when it comes to the accessibility of money, according to the Find A Better Bank website. Small banks tend to offer same-day access to funds, and have "a more readily available network of no-fee ATMs." Large banks, however, may require multiple days to pass before funds can be accessed.
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Large Bank Preferences

Some reasons a person prefer to use the financial services of a large bank rather than a small bank include big presence, comprehensive products and services, tech-forwardness, liquidity advantage, and promotional bonuses/loyalty rewards. Below are our deep findings.


Large banks have wider networks in various locations in a region. For instance, it is common to find their branches and ATM Networks in different locations, hence; they are convenient to customers who may need to access the financial services from different locations in the country (separate coasts).

For small banks, branches may be limited to specific local areas, hence, customers from other locations may not be able to access their services conveniently.


Big banks offer a wider range of financial services, including comprehensive lists of financial accounts and services. Accounts range from loans to deposit accounts, investment accounts, wealth management accounts, among others.

On gaining a competitive edge, big banks aim to be a one-stop place where a client gets all the services needed, while on the hand, small banks have limited products and services options that may be limited to personal loans or businesses loans for members of the community.


Technology plays a big role in streamlining financial services in banks. Big banks invest heavily in technology to streamline their services, therefore, making customers more inclined towards them due to guaranteed convenience in time management and fast service delivery. For instance, a big bank that offers online and mobile banking or remote checking of deposits increases convenience to the point where many people don't even have to visit a branch.

Bigger banks invest in pioneer new financial technologies to improve service delivery to customers, on the other hand, implementing new technologies in small banks may take longer due to limited resources, among other factors.


Because of access to extensive resources, big banks are less susceptible to economic turmoils that can lead to liquidity issues, hence, most customers prefer them because of the security they offer on their investments and wealth. Small/community banks are vulnerable to liquidity issues due to limited resources; they can easily experience cases where they can no longer meet the financial obligations to their clients. When this happens, customers risk losing their worthy investments.

According to a report released in 2017 by the FDIC, the key challenge facing community/small banks is the liquidity issue. In a 2018 report, it was found that a growing number of banks face funding gaps.


Large banks often introduce promotional bonuses (and waiver offers) to their customers to keep customers engaged and loyal to them. Behaviorally, customers prefer financial service providers that have additional advantages on top of the services they offer.