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Put social media into banking…or put banking into social media? October 28, 2010

Posted by nichebanking in Niche banking, Nicheruptive, Social communities, The Long Tail of Banking.
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With a couple notable exceptions, social media and banking have so far gone together about as well as oil and water. It turns out it’s hard to excite a lot of followers and fans with personal finance tips and announcements of shred days.  Who knew? Anyway, in short, banks and credit unions have tried to build social networks around banking…and it has had only mediocre success at best.  That’s because this approach is all about banking first, social second. Bad idea.

Niche banks take the opposite approach from traditional banks and credit unions:  instead of trying to build a social community around a bank, niche banks will build relevant banking services into a social community.

See the difference?

Niche banks identify existing social communities in the long tail (for instance, “people who love ______”). These people are already passionate, and they’re already organized. The niche bank then participates sincerely in those communities, and adds value to the communities by providing a new perspective on content that enriches the community. Then, it makes a tailored banking experience available to the members of that community…without forcing it.

Simply put: social community first, banking second. That’s niche banking.

Letting customers outgrow niche banks October 22, 2010

Posted by nichebanking in Niche banking, Nicheruptive, Problems with traditional banking, The Long Tail of Banking.
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One of the traps that most traditional banks and credit unions fall into is feeling the need (maybe even the duty?) to have products and services that serve customers throughout their entire lives. The thought of losing a customer because they have evolved or outgrown the company is terrifying to the bank.  And it doesn’t take a rocket scientist to see how this feeling leads to the overly long product menus we see at today’s financial institutions, and the “we can be–and WANT TO BE–everything to everyone” mentality that is so pervasive.

So let’s go ahead and get one thing straight right now:  Customers will frequently outgrow Nicheruptive‘s niche banks. They will move on when we no longer fit them. And not only is that totally OK, it’s critical.

Here’s they key:  The wider range of customers and/or needs you try to serve, the less you can possibly truly tailor your experience to a niche group of people.  The more you stretch to accommodate more breadth, the more you stray from your vision. Instead, our banks will be boutiques.

Nobody goes to In-N-Out because of the wide range of food choices to fit any lifestyle. Nobody goes to ING Direct for full-service banking. And those aren’t even niche companies…just companies with a commitment to their strategies. Just imagine the focus a true niche bank will have.

Who does your bank compete with? October 12, 2010

Posted by nichebanking in Commodity banking, Future of banking, Niche banking, The Long Tail of Banking.
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If you are an existing traditional financial institution, who are your competitors?  Other banks and credit unions, of course…right? Not to mention those pesky “alternative” banking sources such as LendingClub, Prosper, brokerages, and many others.

Our founders are famous for arguing that any financial institution’s biggest competitor is not any other financial company, but is rather apathy. Americans care about nothing more than their money it seems, but care about nothing less than their banking services. Apathy.

When you’re a niche bank, you don’t really compete with other financial companies. Instead, you compete with other sources of engagement for that customer segment. For instance, if you’re a fishing enthusiast, you have multiple resources you can turn to, to scratch your itch for needing to be part of that community. You can join an online social networking community, join a local fishermen’s group, join a trade association, or subscribe to a magazine. All of those channels are competing with each other for your engagement.

So when you’re a niche bank, you’re competing with other ways the customer can engage with their passion. Other banks? They are NOT a way the customer can engage with their passion.  If you’re a bank for fisherman, your biggest competitor is other ways people can get their fish on.

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