The challenge: While small banks may thrive with specialized, localized services, scale is essential for staying competitive through 2025, per a Forbes analysis of this year’s top banking trends. That’s because big banks are pulling ahead in highly profitable markets.

The rationale: Consumer banking and wealth management are among the most profitable segments in the financial industry. Larger banks with national or global scale can attract a broader customer base and dominate these lucrative markets.

And they also have the resources to more easily develop the digital tools consumers want, which helps these bigger FIs attract new customers.

Potential solutions: There’s a reason many smaller FIs have gravitated toward mergers and acquisitions (M&As)—this strategy allows them to scale up quickly. But it’s not the only way to stay in the race. They can also:

• Prioritize personalized service: Small FIs can differentiate themselves with tailored solutions, local knowledge, and human connection—which has driven bigger banks’ customers to them already. This strategy builds loyalty but may limit scalability and require significant resources to maintain.
• Leverage strategic partnerships: Collaborating with fintechs provides access to advanced technology and broadens offerings without large upfront investments. And strategic partnerships within FIs’ local community can also create a steady inflow of customers and give them a marketing advantage over bigger competitors.

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