Question

Much of the intense competition in the financial services industry comes from pro- ducts that are the most standardized, such as mortgages, automobile loans, money market accounts, savings accounts, and so on. These products will offer very low profit margins. If you managed a small community bank today, devise a strategy to compete in this environment.

Answer 1

When the profit margin is low, the only strategy to compete is to have bigger market. The bigger market is achieved by targeting customer in different locations/regions.

Or if you are selling unique financial product like lease finance, we will have high profit margin by giving best in class service to the smaller amount of group.

As per the question, we have to manage a small community bank. One important factor for managing it effectively is to focus on bringing customers closer to banks and keep them updated through digital means and make them satisfied. By this strategy, trust of the customer is not destroyed. Trust is the key essence of the bank to run in a profitable manner. If the customer trust is lost, then nothing can be done. Expanding market is important and building trust to that large group of customer is more important strategy to maintain and increase profit.