Respondents’ selections aren’t surprising, given the local focus and the distribution of services a typical community bank would offer. Community banks originate a disproportionate amount of loans to small businesses, as we’ve noted, and on average hold a relatively large volume of CRE loans. A community bank may be the most qualified or only bank to make agricultural loans. On the other hand, wealth management and retirement services are probably offered by a brokerage firm or a big bank and less of a concern for a community bank whose expertise focuses on deposits and lending.

Competition against community banks is more intense when it includes national financial institutions, digital-only banks, and nonbanks that sell most of their products and services online. In the survey, the largest perceived primary nonbank out-of-market competitors were for payments services (27% of respondents) — most likely, consumer payments apps (e.g., Cash App, Venmo) that compete directly with Zelle or pose a threat to legacy consumer payments methods — and mortgages from nonbanks with a large online presence (18%, e.g., Rocket Mortgage).

Key challenges for community banks then, suggested by the data, are to compete effectively with peers and larger in-market banks and adjust to the threat from some digital-first and digitally native players. How they do it is unique to their business strategy, and it should probably include their approach to channels. As we’ve covered, to compete successfully for customers, updating and integrating digital and physical banking is an imperative.

Big questions community bankers should revisit are: Faced with bigger rivals with large digital operations and fintechs with national offerings, how do I go from my current state — perhaps with a branch-focused approach to customer acquisition and servicing, dated technology, processes designed for local banking services, and siloed channels — to modern systems and operations? What products and services will generate loyal customers for the stickiest, most profitable offerings while I navigate head-to-head competition among peers? But maybe the most important question to ask is: What about my strategy anticipates the future?