Carey Ransom is a SaaS entrepreneur, executive, investor and advisor. He is president of Operate and managing director of BankTech Ventures, a strategic investment fund focused on compelling technologies for community banks—founded and funded by leaders in the community bank ecosystem.

In banking, differentiation is not just desirable, I’d say it's essential for survival. Rules, regulations and cursory customer expectations may create the impression of similarity, future success will be more likely for banks that can find a more unique path. Does that mean a bank is all alone to figure that out? I’d say no — it demonstrates the importance of collaborating with peers.

It may seem like a paradox. Banks must simultaneously stand out while coming together. What? The most successful regional and community banks understand that collaboration strengthens their differentiation rather than diluting it.

Here's why:

Strategic focus requires shared resources

No bank can excel at everything. Finding the strategic sweet spot — whether it's agricultural lending, wealth management for specific demographics, or embedded tech-centric banking services — requires concentrated investment. By working with peer banks on non-differentiated functions like compliance, core technology, and back-office operations, institutions can redirect precious resources toward their unique value propositions.

When small banks share costs on more commoditized services, they unlock some of the financial runway needed to invest deeply in what makes them special. This isn't just about cost-cutting; it's about strategic resource allocation.

Knowledge networks accelerate learning

Banks pursuing different strategies create a powerful learning ecosystem when they share their experiences. A bank focusing on health care lending, for example, can learn valuable customer service approaches from a peer institution that specializes in another relevant business category. These knowledge exchanges don't compromise competitive advantage; they increase collective wisdom around shared topics of interest.

Both formal peer groups and informal collaborations create spaces where bankers can discuss a range of challenges and opportunities. Within these ecosystems of trust, they should be more open and willing to share insights with their peers. The collective intelligence helps small banks compete against much larger ones.

Scale without being identical

Technology investments — the very reason BankTech Ventures exists — present the strongest case for collaboration. Few small banks can independently develop cutting-edge digital platforms or identify the best ones, yet customers expect best-in-class tools regardless of the financial institution’s size. Collaborative technology investments — through shared service organizations or investment partnerships — create the scale to compete digitally while still preserving each bank's unique market approach.

When small banks work together on technology foundations, they can influence customer-facing products and services to align with their individual strategies. This preserves some differentiation while creating necessary scale.

Regulatory resilience through unity

Regulatory costs and distractions disproportionately affect smaller banks, which have fewer compliance resources. Collaborating on compliance frameworks and regulatory interpretation helps small banks navigate requirements without losing strategic focus. When small banks unite on regulatory matters — by working with the Independent Community Bankers of America, for example — they strengthen their influence for the benefit of all institutions.

Should banks expand these “collaborative differentiation” efforts?

The most successful small banks will adopt a mindset of “collaborative differentiation,” working together to stand out in ways that matter. We see the most engaged banks in our ecosystem operating that way. They’re open, confident, collaborative and curious. They understand that standing out doesn't mean standing alone.

My suggested questions for banks refining their strategic focus include:

Which areas or functions could benefit from more collaboration with peers?
What knowledge — inside and outside of banking — would enhance strategic capabilities?
How might technology (and other) partnerships create scale while preserving a unique approach?

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Small banks that find the balance of collaborating while differentiating on strategy will thrive as competition intensifies. I am convinced that more banks will be able to stand out while also standing together.