Community banks are at a critical moment of "advance or retreat."

They have taken steps to offer customers features and services comparable to those of large banks and digital banks, but another challenge cannot be solved through technology investment: the factors consumers consider when choosing financial service providers, and the people they seek advice from when making decisions, have fundamentally changed. Take my own children, for example—they are in their twenties and recently switched to a community bank due to recommendations from friends and family, as well as positive reviews online and on social media.

This change means that community banks can no longer rely solely on their local physical presence to solidify their position. Technology, social media, and the Internet of Things have reshaped the meaning of "community" and changed who people trust. Community is no longer limited to physical space but is a set of shared values, interests, or a sense of belonging that people strongly identify with. This shift also provides community banks with an excellent opportunity to redefine who they serve, why they serve them, and the value they bring to customers.

The following three strategies can help community banks leverage the evolution of the definition of "community" to reimagine their strategic vision.

Strategy One: Build Micro-Financial Service Ecosystems

Community banks that define their customer base by industry or professional associations have significant opportunities for differentiation and market share growth. For example, many community banks are developing strategies to become the preferred local partner for insurance agencies, doctors, dentists, universities, or other industry groups. Others focus on serving underserved segments to attract deposit growth and cultivate them into credit customers and potential small business clients.

A typical example of this strategy can be seen in theFirst HorizonandSunTrust(now renamed Truist) partnership withOperation HOPE. These institutions provide part of their physical branch space to the nonprofit's dedicated financial literacy and credit counselors. This partnership supports their Community Reinvestment Act compliance strategy while serving the communities they serve in a way that aligns with brand values. Investing in ecosystems that cater to the needs and interests of specific consumer groups enables community banks to build unique community bonds that competitors find difficult to penetrate.

Strategy Two: Serve Communities of Shared Interest or Affinity

The definition of "interest" has become extremely broad, and opportunities exist wherever there is a shared interest. Whether the group consists of gamers, sports team fans, or loyal enthusiasts of a particular car brand does not matter. Furthermore, social media provides community banks with channels to connect with localized interest communities. Any shared interest that people embrace enough to celebrate their relationship or sense of belonging can become an affinity community opportunity for community banks.

Simple strategies, such as customized card branding, appearing at special events, or providing co-sponsored signage at affinity community venues, can help community banks deliver the kind of special experiences that build loyalty and connection.

An excellent example is the partnership between Pinnacle Bank and the NBA's Memphis Grizzlies. Loyal fans can simply visit a local Pinnacle branch to open a unique "Grizzlies" deposit account. Account benefits include a free Memphis Grizzlies debit card, free mobile banking, and special ticket offers for the basketball team's upcoming home games.

Strategy Three: Transform Physical Branches into Extensions of Virtual Experiences

Many leading retailers today have invested in creating environments whose primary purpose is to invite consumers into a tangible, sensory experience that brings brand values and customer base together in one place, rather than simply selling products. Everyone in the room, even if only staying for a moment, can feel that they are part of the brand.

Community banks can adopt a similar perspective to align their physical presence with their digital presence, thereby modernizing their delivery strategy. We have seen this experience in action at Capital One Cafés—which are part bank, part coffee shop, and part digital lifestyle guidance counter.

Community banks need to look further ahead when investing in modernization and innovation to attract and retain digitally native customers. Those institutions that can harness the power of affinity communities and leverage digital transformation to build strong connections with these segments will achieve the kind of organic loyalty that can sustain and drive growth over the long term.