Are you tired of being a ‘small fish in a big pond’ when it comes to your bank? Maybe it’s time for something new. Niche banks are an alternative type of financial institution that focuses on your unique lifestyle rather than the bottom line or share price.
If you feel like your current bank doesn’t understand you, then a niche bank could be the perfect solution. Find out how these financial institutions serve the needs of LGBTQ members, creators, and environmentally conscious individuals—and see if it’s right for you.
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A niche bank may be worth looking into. And here’s a closer look at how they work.
Niche Bank Definition and Examples
Niche banks are financial institutions that offer specialized products and services for underserved populations, like artists, Gig economy workers, women, the LGBTQ community and environmentally conscious individuals.
These banks are smaller and are known for their personalized tools and features, like cash bonuses and special account perks.Not all banks are the same, and niche banks are specifically designed to meet the needs of specific groups.
For example, there are banks that only serve people in the LGBTQ community or environmentally conscious individuals.
If you’re tired of the same old big banks that fail to address the things that matter most to you, then a niche bank might be worth looking into.
From LGBTQ and environmentally conscious to women and creators, niche banks are catered towards specific groups of consumers who may not feel traditionally served. With personalized tools and a deeper connection to your values, these specialized institutions are more than just banks — they’re communities.
So, if you feel like your current institution doesn’t truly “get” your lifestyle, then a niche bank may be worth looking into.
Alternate name for the niche bank is Vertical bank.
A niche bank example is Studio Bank in Nashville, Tennessee. It is specifically designed for creators—think musicians, writers, builders, artists, and photographers.
When you are at a local branch, you may find local snacks and coffee, and locally sourced gifts. In addition they have a specific intention to meet the needs of startups, entrepreneurs, tech companies.
How Does a Niche Bank Work?
Niche banks offer their services to a segment of the population or market; for example, an immigrant community may have specific requirements for their banking service when signing up with a traditional bank.
While traditional banks are often slow to respond to the desires and needs of these groups, niche banks target them with hyper-specialized services that fill these niches.
Niche banks are designed to meet the specialized needs of the market segment they target. They offer highly specialized services that traditional banks don’t carry, which can fill in the gaps left by their more traditional counterparts.Just like a boutique, niche banks are small, but they offer personalized services tailored to fit a specific need.
A niche bank focuses on one specific population (or segment of it) and offers services based on their needs. This means more streamlined, specialized offerings, tailored specifically to you. Plus, niche banks are focused solely on your business and how to best help it—so you’ll get more personalized attention and service than you would from a large traditional bank.
For instance, some niche banks meet the needs of their customers by providing them with the following:
- Families facing financial struggles may be offered financial wellness tools and early paydays.
- Tax management and invoicing entrepreneurial tools
- “Chosen name” debit cards for customers who are non-binary and transgenders.
- Native Americans offered tribal lending.
If you are an entrepreneur, a retiree, military veteran, or person of color with a specific aspect of your life that distinguishes you, which bank would you rather consider?
Option A: Would you rather consider a bank with a big name and is tech-forward, and offers diverse services and products that does not suit your kind of person?
Option B: Or a niche bank with similar technology as the bigger one with tools and features tailored to meet your financial situation and aspirations?
Most people would prefer to go for what’s more personal to them as offered by option B — reason niche banks are becoming popular.
Niche Bank Examples
Niche banking platforms examples that provide suitable solutions to a specific group of people.
- Lili is suitable for freelancers.
- Chickasaw Community Bank is a Native American niche bank offering home loans to Native Americans. They are also 100% owned by tribals.
- Majority — Niche banking platform for migrants.
- Studio Bank is a niche bank for Nashville-based creators.
- Greenwood is a niche banking system specifically designed for Black and Latinx individuals.
- Daylight is a niche banking platform for the LGBTQ community and its allies.
- Ellevest is a niche banking platform for women.
- Laurel Road is a niche banking platform for business professionals and health care facing a huge student loan burden.
- Ando Money is a niche banking platform for those who want to fight climate change.
Studio Bank and Chickasaw Community Bank are both chartered, however, the enlisted rest are neobanks. Meaning that they partner with a bank to provide their customers with banking services.
Why Are Niche Banks on the Rise?
A shift is happening in the world of banking where more and more people are choosing to bank with niche banks that provide a better experience.
Underbanked communities have a big need for this shift since larger institutions sometimes do not serve them in the way they deserve. Some niche banks even don’t charge any fees at all, making them a great choice for those who are more budget conscious.
These banks focus on specific groups—like teachers, healthcare professionals or entrepreneurs—and offer them useful products and services.
Banks that serve specific groups, known as “niche banks,” are on the rise with a focus on technology and a customer-centric approach—even when it comes to the perks.
Before technology entered our lives, most people banked at an institution near them. Over time, many have moved to online banks. According to BAI, a financial services nonprofit, 43% of consumers report doing all of their banking digitally and 84% plan to maintain the same level of digital usage post-pandemic.
Online banks have been on the rise and have now become even more popular because of the COVID-19 pandemic. The convenience of banking from home means you can keep up with your account without taking time out of your day.
Niche banks cater to certain groups, such as immigrants sending money abroad, international students using payment apps, or people with very little money who prefer physical locations and are frustrated by high minimum balances at traditional banks.
Pros and Cons of a Niche Bank
Pros
- Niche Banks directly meet the needs of their target audience.
- Niche Banks are much easier to find with technology.
- Most of them have very nice tools and features.
Cons
- Niche banks may be limited in their resources and offerings.
Pros Explained
- Niche Banks directly meet the needs of their target audience. They understand their customers’ desires and create products that fit those needs. They offer services aimed at serving specific employee sectors, or demographics. For example, they realize that the needs of a single mother juggling childcare and a career are different from those of a young twenty-something saving for a first home.
- Niche Banks are much easier to find with technology. As our lifestyles become increasingly busy and diverse, it makes sense that one-size-fits-all banking can feel too impersonal. Technology has made it easy to find niche financial institutions that cater to your specific needs. Twenty years ago, most people were limited to the banks and credit unions in their geographic area. Today, you can find even more options.
- Most of them have very nice tools and features. Niche banks offer services and features that are uncommon at traditional checking accounts. You might expect a niche bank to offer better interest rates, but the bigger benefit may come from built-in tools that help you manage your finances — whether invoicing clients or saving taxes. These banks also may offer customer support in multiple languages, making it easier for you to get questions answered.
Cons Explained
- Niche banks may be limited in their resources and offerings. Some niche banks have a curated list of product offerings that may not cover everything you need. For example, Lili is a niche bank for freelancers, but it only offers one bank account. If you need a business loan or business credit card, you’ll have to get those somewhere else. Niche banks tend to offer basic products and services, like bank accounts. So, if you’re looking for a specific product like a business loan or business credit card, it’s likely you’ll have to look elsewhere.
Conclusion
There’s a bank for everything these days. These niche banks provide a more tailored and personalized experience to their select clientele and aim to connect with them on an emotional level. These banks are particularly appealing to those who feel like large, faceless institutions don’t represent their interests.
Niche banks focus on providing a more tailored and personal banking experience to a select group of customers, aiming to meet their financial needs and connect with them on an emotional level.
