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Report: Community Banks Forecast Change in Competitive Landscape

Community banks historically see comparably sized banks as their biggest competitor for a number of lending products, but fintech is changing this outlook, concludes research by two noted economists.

Community banks overall tend to compete with other small banks in the lending business, as reflected in the recent CSBS 2018 Community Banking Survey. Nearly 55 percent of the respondents viewed other small banks as their primary competitor for small business, while 21 percent said the same of residential and nearly 28 percent said small banks were their competition for consumer lending.

However, the outlook for future competition is far different. Only 38 percent of the banks expected small banks to be their primary competition for small business lending, while the percent of community banks that saw residential lending as a competitor dropped to 16 percent and to 20 percent for consumer lending.

The emergence of fintech firms as a loan competitor can be attributed to the change, concludes the paper by Temple University professors William C. Dunkelberg and Jonathon A. Scott. The paper is one of a series that takes an in-depth look at the results of the CSBS annual survey, which this year included 521 community banks from 37 states.

While less than one percent of the surveyed banks currently view fintech as a competitor for small business loans, 7 percent do so in the future. A similar shift is apparent with the other two sectors: 4 percent of the banks currently see fintech as a competitor for residential loans, but that number rose to 13 percent when they forecast future competition. And while 2 percent of community banks currently see fintech as a competitor for consumer loans, 15 percent see then as future competition.  

                                                                     Source: CSBS 2018 Community Bank Survey

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