Mid-sized banks are experiencing what might be considered an industry-specific “middle child syndrome”. Essentially, they’re trapped in a middling role: They’re not as large as financial giants that have been around forever. But they’re also not as small as community-based banking entities. It’s a hard place to be, but being in the middle doesn’t mean they can’t get noticed — or get business — without adding more people to their ranks.
What’s the “just right” solution, then? Mid-sized banks must be ready and willing to apply some focused (yet frugal) growth techniques to their operational processes. They should also apply these strategies to their marketing solutions and customer engagement practices.
And there’s little argument that these changes need to take place soon. After all, the financial industry remains an ultra-crowded field. In the past two decades alone, banks around the world have found themselves being disrupted by both their traditional competitors (e.g., other banking organizations) and new players.
Stiff Market Conditions and Narrow Margins for Mid-Sized Banks
As a McKinsey and Company report shows, the payment industry has outshone banks since the beginning of the century, stealing quite a bit of market share from conventional banks. (For reference, the payment industry governs how money moves along payment rails; it’s become huge in a digital era where money needs to flow friction-free around the globe.)
This payment-versus-banking reality means that banks are forced to compete for a smaller slice of the overall financial pie. And while mid-sized banks may have more dollars to throw at this challenge than their smaller counterparts (e.g., hometown banks, credit unions, startups), they don’t have the deeper fiscal wells of legacy banking players.
Another challenge for mid-sized banks is the changing demographics of banking customers. Take Generation Z, for instance. Their generational cohort brings a distinct, complex money perspective to the world of finance. Yes, they’re willing to treat themselves sometimes, even if they don’t have the funds, according to an article from The New York Times. On the other hand, another Times piece notes that they’re also pretty decent at saving up for an uncertain future. Banks must be able to offer them assistance while at the same time catering to the needs of Boomer, Millennial, Generation X, and Generation Alpha clients as well.
Finally, let’s not underestimate other forces that are affecting mid-sized banks. These include a rocky economy, an uneven job market, and the so-called “gray tsunami” that’s rocking the workforce. And the list continues.
But here’s the glimmer of hope: All mid-sized banks can find their strides and niches even amid the ever-changing environment in which they operate. When they do, they can gain some serious advantages, not the least of which is being able to attract and retain individual and corporate customers.
Strategic Positioning Maneuvers Enable Wins for Mid-Sized Banks
There isn’t one definitive method for all mid-sized banks to be able to better compete in today’s dynamic, global marketplace. However, applying a mixture of the following five strategies should provide a mid-size banking institution with a leg up in the coming year.
1. Commit fully to vetted AI products and solutions
In 2025, PricewaterhouseCoopers released figures showing that comprehensive AI adoption could improve decision-making, speed, and efficiencies in financial institutions. However, many banks — including those that are mid-sized — haven’t gotten to the point of full-blown AI use. That’s a costly “miss”, but it can be rectified rapidly by a strong commitment to embracing AI.
What can AI do for a bank? For one, generative AI products can unlock and operationalize all the data that’s commonly trapped in contracts. Clients of mid-sized banks are sitting on untold numbers of contracts and binding documents. However, people don’t have the time to routinely sift through those contracts looking for intelligence and sending out payments. AI products like the system offered by Hudson Technology Systems can.
Hudson Technology Systems has created an AI-fueled tool built to monitor and manage contractual payments. The AI can look through contracts to find opportunities for mid-sized banks to help their clients leverage their agreements more effectively while remaining compliant. As a result, banks can make sure the clients are receiving and sending funds promptly and efficiently. At the same time, customers can be onboarded faster, as well as have more insight and transparency into their contractual obligations and what they mean for their payments and cash positions.
2. Focus on solving customers’ biggest actual concerns
Customers trust mid-sized banks to help them with their biggest areas of concern and need. To best serve those customers, the financial institutions must not only understand what each customer wants but also be able to deliver tailored services and products. (As a side note, financial wellness ranked high on a Personetics survey of what customers want from their banks right now.)
This is no small task, but it can be achieved through the right technologies. For instance, Bank of America reduced the number of apps it offered customers from a handful to one. At the same time, it developed an AI assistant called Erica to guide customers to the right products. The goal was to make life simpler for customers by offering them a single source to review their entire financial picture.
Although the Bank of America isn’t mid-sized, its approach highlights the benefits of putting more information into a customer’s hands. Plus, its use case reveals that there’s little need to bring on more people to offer deeper personalization.
3. Perform core functions better than any other competitor
A third way to tackle rising competition for mid-sized banks is by concentrating on improvements in the core functions that the bank does better than most other competitors. This isn’t a new technique, of course. However, it’s one that works for businesses in all sectors. And it produces major successes for mid-sized financial organizations because it allows them to put all their people’s energies and resources into improving their unique selling propositions (USPs) instead of diluting their efforts and branding.
SoFi is a mid-sized bank that deserves recognition in this category. SoFi consistently scores high marks for its attractively low interest rates. At the same time, the institution attempts to keep its fees low. That said, SoFi isn’t trying to be the right fit for everyone on the planet. SoFi doesn’t have separate checking and savings options, nor does it have any physical locations. Consequently, it’s not going to appeal to customers who would prefer to speak with a person in a storefront setting.
Taking the time to drill down on what a mid-sized bank excels at doing will take time. However, identifying its best assets and then making them a little better shouldn’t require an influx of new talent. On the contrary, the people already in place should be able to contribute, which can mitigate the high price of finding, interviewing, hiring, and training personnel.
4. Outsource functions outside of teams’ bandwidth
An “oldie but goodie” way to minimize the need to hire more team members is by shifting tasks and projects to outsourced individuals and providers. Though contractors cost money, they are a fixed cost that can be predicted, as well as pulled (if the need arises).
A prime example of an outsource partner for banks and fintechs is Fiserv, a business that aims to simplify account processing workflows. By taking the responsibility of accounts processing away from banks, Fiserv allows them to expand their customer base without expanding the number of their team members.
Outsourcing doesn’t have to be a forever solution, though. It’s possible today to hire interim executives and C-suite professionals on a monthly basis. This means that mid-sized banks don’t have to worry about having gaps in their roster of high-level leaders when someone at the top leaves, retires, or shifts into a lateral position.
5. Form partnerships with non-competing entities
Mid-sized banks don’t have to go it alone when it comes to attracting new customers and retaining their current base. They have the option of setting up alliances with non-competing organizations. The right partnership can help a mid-sized bank gain more exposure rapidly, as well as get creative with the advantages it can bring to its customers.
Case in point, U.S. Bank announced in 2024 that it would be offering services to Edward Jones’ clientele in the coming year. Likewise, U.S. Bank has arranged to work with a fintech business to enable the bank’s customers to become more financially comfortable and knowledgeable. These initiatives help put U.S. Bank and its partners in the spotlight, which improves brand recognition and ostensibly drives product and service sales for both parties.
The important caveat for mid-sized banks to remember when forming alliances is that the alliance has to be ethical, within compliance and regulatory guidelines, and beneficial to customers.
People Are Pricey, Innovative Thinking Is Less Costly
Do mid-sized banks sometimes have to bring more people into the fold to reach objectives or serve customers? You can bet on it. Yet not all problems need to be solved by increasing headcount.
Getting innovative frequently costs much less than hiring workers, and it can help a mid-sized financial institution achieve its desired results.
Featured Image Credit: Photo by Tima Miroshnichenko; Pexels; Thanks!
