Question: Recognizing the importance of “brand” in banking, do you have any insights that would be helpful to a minority-owned bank.
Answer: I think that brand is even more important to a minority-owned bank. Brand is basically the ability to differentiate yourself to gain a competitive advantage. Because banking products tend to be somewhat bland and homogeneous, bankers generally have trouble differentiating their institutions from the competition. This is the reason banking organizations tend to grow through mergers and acquisitions as opposed to organic growth. Many minority-owned banks have a specialized purpose that can be used to differentiate itself and that can become a real competitive advantage.
Question: Could you be more specific?
Answer: Sure. It has been argued that a certain segment of minority-owned banks are at a disadvantage because they may have overhead expenses related to financial literacy offerings to their customers that other banks may not have. On the surface, this may seem like a disadvantage, but it also provides an opportunity to build customer relationships that will remain loyal to the bank and provide stable revenues over time. We also hear that some minority banks are at a disadvantage because they cannot utilize the generic policies, handouts, or advertisements available to conventional banking models. My reaction to that is - why would they want to? Their advantage lies in being different, not in trying to tailor conventional banking to their specialized mission. For instance, we have seen minority-owned banks develop specialized expertise in providing financial services to churches and church related customers, a market often overlooked or misunderstood by other institutions.
Question: Any thoughts on how a minority bank might get started in establishing brand?
Answer: As I have stated, all banks, including minority-owned banks should capitalize on the brand inherent to its mission. We have seen organizations use affinity marketing to sell credit cards and other financial services. Clearly, people show a willingness to identify with a particular group and are willing to utilize the products and services of an institution that reinforces their commitment to that group. Often, a minority bank has an established affinity group inherent to its mission and can achieve success by providing products and services that build upon the customer’s sense of community and pride.