The branches now have a different appearance. These days, practically every community bank has more open space, fewer teller stations, and glass-walled offices with financial advisors seated with laptops facing clients. It’s intentional. Deposits, withdrawals, and simple account inquiries have all moved online, leaving physical spaces to manage the messy human side of money, life planning, and trust-building that algorithms cannot.
However, even that is evolving. Ten years ago, small-town banks would not have predicted the exodus they are currently experiencing. Consumers aren’t simply switching to digital rivals for their checking accounts.
| Category | Details |
|---|---|
| Industry Focus | Community & Regional Banking |
| Primary Challenge | Deposit outflow to digital-first investment platforms |
| Key Solution | Digital wealth management platforms |
| Market Entry Point | Investment accounts as low as $500 |
| Peak Digital Usage | 25% occurs nights and weekends |
| Reference Source | American Banker – Digital Banking Trends |
They’re also using their investment funds to open brokerage accounts through app-based platforms that guarantee ease of use and no fees. It is existential for community banks that have trillions of dollars in deposits to watch those assets move to other places. Fighting technology with technology is becoming a more common response.
Platforms for digital wealth management are emerging as the preferred tool. These are not the kind of white-glove advisory services that are only available to clients who own half a million dollars or more. We are discussing investment tools that anyone with an extra $500 can use.
The math is simple: you can prevent people from leaving in the first place if you can sufficiently reduce the barrier to entry. All of this has a sense of defensive urgency, as if waiting another year would be too late.
A compelling case study is provided by U.S. Bank. The bank is “pivoting to offense,” according to Sekou Kaalund, who oversees its branch and small business operations, after reducing its branch network by almost a third since 2015—closing in-store locations rendered obsolete by mobile apps. The closures weren’t exactly failures.
They represented reality: when people can deposit checks from their couches, they don’t need Saturday teller access. However, branches are still alive. They’re becoming advice centers, and U.S. Bank is investing $200 million a year in new construction and renovations to create areas where business experts and wealth advisers can sit.
It’s a wager that even in a world where screens rule, human interaction is still important. Kaalund refers to it as “phygital,” an awkward combination of the words “physical” and “digital.” This hybrid model is demonstrated by the bank’s co-browse feature, which allows users of the mobile app to call upon a live banker who appears in a window-in-a-window, viewing but not controlling their screen. It’s similar to having a tutor look over your shoulder, but your shoulder is a metaphor and the tutor is somewhere in a call center.
The future looks different for smaller organizations without the resources of U.S. Bank. It is too expensive to establish an internal registered investment adviser business, complete with operational infrastructure and regulatory compliance teams. They are therefore outsourcing.
Community banks can offer investment accounts without employing hordes of compliance officers or financial planners thanks to wealth-management-as-a-service platforms. The heavy lifting is done by the software. The customer relationship is maintained by the bank.
This is more important than it may appear. When a person opens an investment account at a different bank, their first bank runs the risk of falling to second place and becoming the location where paychecks end up before money moves on. Wealth management tools act as a carrot and glue, encouraging clients to strengthen rather than broaden their banking relationships as retention becomes the primary objective.
Unexpectedly, the data shows that roughly 25% of activity on digital wealth platforms occurs on weekends and at night, outside of regular business hours. Scrolling through investment portfolios on lazy Sunday mornings or after kids go to bed is a window into people’s real lives. Branches are unable to match that availability. Digital tools are able to.
The less romantic driving force behind this change is noninterest income. Wealth management fees are a good source of income for community banks since they don’t rely on interest rate spreads. In a situation where every basis point matters, retaining deposits is also important. You still gain from the relationship even if your client’s funds are invested rather than kept in savings at your institution.
However, tension is also present here. Banks that position themselves as reliable local institutions and community anchors are suddenly promoting sophisticated products that may even be dangerous to clients who are more at ease using certificates of deposit than exchange-traded funds.
Opening wealth management to those with modest savings is a noble goal of financial inclusion, but it also entails persuading someone with $500 to invest instead of save. In small towns where memories of 2008 are still fresh, that’s not always an easy sell.
Banks are drawn to these platforms due to their rapid deployment. Connecting to an existing digital wealth solution can be completed in months rather than years, as opposed to developing proprietary technology or hiring full-time advisors.
The operational requirements remain low. The expenses remain reasonable. Speed is important for organizations watching rivals launch comparable services. No bank wants to be the last in the county to offer no investment opportunities.
The long-term effectiveness of this approach is less certain. In addition to providing convenience, digital-first platforms like Betterment and Robinhood built whole brands around democratizing investing, making it seem approachable and even enjoyable.
Community banks benefit from longevity and trust, but what about the cool factor? That is more difficult to produce. Younger clients in particular may be skeptical of the new investment app offered by their local bank, questioning whether it truly differs from what they could find elsewhere.
The pivot is still taking place. Branches are reorienting and contracting. The number of digital tools is growing. Through self-service interfaces, wealth management—once exclusive to the wealthy—is making its way down to middle-class households.
It’s unclear if that will save community banks or just postpone the industry’s inevitable consolidation. There’s no denying that standing motionless is no longer an option. Banks are rushing to keep up with the money as it moves.
