NASHVILLE, TENN. — Community banks must be more active in the consumer lending market to secure commercial lending gains, said Teslar Software CEO Joe Ehrhardt.
Ehrhardt, who also chairs the Springdale, Ark.-based software firm, delivered a 45-minute address to dozens of community bankers March 11 during the second day of the 2025 Independent Community Bankers of America LIVE annual conference.
According to the FDIC, community banks have 15 percent of the overall consumer loan market, but hold a larger portion of small business and agricultural loans. Ehrhardt said banks that fail to enter the consumer market will inevitably lose commercial customers as younger consumers age. Nearly 40 percent of small business owners began their operations as side hustles, he added.
Ehrhardt said banks must establish every step of the commercial lending process and have a pipeline to consumer lending using existing commercial customers. He also listed several other must-haves for community banks to find consumer lending success:
- Ensure a quick application/approval process.
- Have a personal lender be closely involved in the process.
- Allow customers to lend from anywhere.
- Launching niche campaigns — potentially debt consolidation — using consumer data sets from third parties.
- Using existing customer data to cross-sell products.
Ehrhardt said banks now face more competition from fintechs; operational inefficiencies; and economic fluctuations can drive up default rates. They also face higher credit risks; lower profit margins; regulatory and compliance burdens; operational costs; lack of economies of scale; and market competition.
Some community bankers feel that consumer lending is inefficient and takes time away from better revenue-generating opportunities, Ehrhardt said. Still, the coming massive transfer of wealth between baby boomers and younger generations leaves community bankers with no other choice than to make consumer loans, Ehrhardt said. Sixty percent of personal loan borrowers are either millennials and Generation Z, and 62 percent of those generations plan to start their own businesses, Ehrhardt added.