The Long Tail of Banking

Why niche banks don’t exist today February 25, 2010

Why don’t today’s banks pursue micro-segmented niches?  The reason for this is the same one that drives most of the decisions (or lack thereof) in banking.  In a word:  fear.

In this case, today’s banks don’t develop strong niches because they are afraid.  Afraid of what, you ask?

Afraid of leaving opportunity on the table.

Afraid that if we don’t cast the net wide enough, we won’t catch enough fish.  Afraid that if we aren’t as generally acceptable to the masses as possible, we won’t maximize our customer base. Afraid that if we don’t maximize our customer base, we won’t make as much money as possible.

So the question becomes, is this fear legit? Are we justified in being scared?  Are we not afraid, but actually just being prudent and responsible?

To be fair, it’s understandable that there is so much fear. Being broad (the opposite of niche) seems like the commonsense strategy to gain a critical mass of customers. And in the olden days, like pre-1995, it was probably a legit concern.

But not today.  In fact, today, broad is less appealing than ever before. Consumers have become accustomed to tailored, personalized experiences that fit them like a glove.

So when will the industry change?  Well, like with everything else in banking, banks want to be innovative but don’t want to be first.  So somebody has to be first, setting a precedent and a “case study” for Boards of Directors across the country to take solace in.

That is what we’re working on.