On the one hand we have online banking which although relatively new, is settling into a rhythm.  On the other hand, we have small banks, which is where American banking started.  The first U.S. banks were small.  They didn't all start as Citi or Wells Fargo.  So where do these stand when compared to each other in today's market?

Let's start with speed.  Certainly online banking is faster, there's little question of that; especially for small loans.

A recent article on AmericanBanker.com compared the two types of banking and the conclusions were what you'd expect.  Small online loans are easier to conduct online because the approval process is so much faster and of course, travel time is eliminated.

So, the online borrowing process is streamlined when compared to the small bank model.  From a historical perspective, it's a bit ironic because prior to the online banking system, small banks were the fast answer when compared to the big ones.

So is there a place for small banks?  Certainly there is, but not without some evolution.

Small banks will always have a place because some people prefer to handle their business, including banking, direct with another person.  Beyond that, the future of small banks will be re-defining what they do and what they do best.

Relationships are the key.  When they develop a new customer they need to build that relationship by offering more than just small loans and traditional banking.  Can I get my insurance there?  Do they have a financial advisor, even if I don't have a couple of million to invest?  Do they offer options that online lenders cannot match, such as easy account transfers?  Do they have a notary and more?

Some small banks will not survive, but many will if they emphasize what they do best and expand their offering of services.