CHAPTER 2Community Banks and FinTech

IS FINTECH A THREAT OR AN OPPORTUNITY FOR COMMUNITY BANKS?

In order to understand how FinTech can help community banks create strategic value, let us take a closer look at community banks, the issues facing them, and how FinTech can help improve performance and valuation. As we saw in Chapter 1, when attempting to define a FinTech company, myriad interpretations exist in delineating community banks and it is important to establish a clear representation before analyzing the sector. For purposes of this book, we define a community bank as a bank or thrift with between $100 million and $5 billion in assets.

Community banks are a subset of depository institutions. Depository institutions include banks, bank holding companies, savings banks, mutual savings banks, stock‐owned thrift institutions, mutual thrift institutions, and credit unions. While we focus largely on U.S. community banks in this chapter, depository institutions more broadly are facing similar challenges and have several common characteristics: they accept deposits from consumers and/or businesses; their deposits are generally insured by the federal government; they are chartered by the federal government or various states and regulated by agencies of these governments; and they generally deploy the acquired deposits by making loans to customers, either businesses or consumers, or making other investments that provide earnings.

Threats to Community Banks

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