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Small banks may appeal to millennials, but fintech looms large

Community banks may have what millennials are looking for ina banking relationship, but technology remains a hurdle for small institutions.

During a July 20 meeting of the FDIC's advisory committee oncommunity banking, several millennial-aged panelists emphasized the importance ofrelationships and trust in their decision to join or stay with a financial institution.The panelists agreed with community bankers on the committee that small banks canmeet the needs of young customers who seem to value the high-touch service of localfinancial institutions.

Still, the young panelists pointed out that convenient mobileand online platforms are critical when choosing a bank. For most of the millennials,the ability to use digital tools trumped the need for a branch, though some notedthat the physical presence of a bank was comforting, particularly for complicatedtransactions. One panelist pointed out that if "information is readily available,"community banks can serve the younger demographic well. 

As the panel ended, FDIC Chairman Martin Gruenberg pointed outthat the millennial desire for relationship-banking may represent an opportunityfor small banks to advance the business model with technology.

During a discussion of financial technology later in the day,bankers voiced concerns about the competitive landscape of the payments space, citingthe growing importance of peer-to-peer payments. One banker summedup the technology struggle as a question of risk versus reward. Another communitybanker flagged the payments space as a particularly intimidating area for smallinstitutions. Small banks are being "marginalized" and eliminated as intermediaries,she said.