Community banks are the backbone of local economies, yet today their very model is under strain. 

Over the past several months, I engaged directly with more than 75 community bank leaders through the ICBA ThinkTECH Accelerator. Those conversations underscored what the numbers already show: 

While community banks represent only a fraction of the nation’s financial institutions, they are disproportionately responsible for small business lending, agricultural finance, and access to credit in rural and underserved markets. 

These banks aren’t just financial institutions. They are relationship-driven anchors of local economies, powering small businesses, agricultural lending, and community growth in ways large banks and fintechs can’t replicate. 

But their operating model is under intensifying pressure. An aging customer base, the rapid shift toward digital-first expectations, and the rise of sophisticated scams and fraud schemes have left many community banks stretched thin. At the same time, vendor lock-in and legacy core systems prevent them from adapting at the speed the market demands.

This is your guide to closing the risk infrastructure gap.

Why the community banking model is struggling

The community banking model is under strain because the risks and demands facing these institutions are growing faster than their ability to adapt, and unlike larger banks, they lack the scale and infrastructure to absorb the impact. 

Their customer base is aging, yet younger generations increasingly expect digital-first services and instant payments that require costly technology upgrades. To compete for deposits and net interest income, many banks are expanding beyond their traditional geographic footprints, exposing them to customers they don’t know personally and to fraud schemes that transcend local boundaries.

At the same time, the nature of fraud has shifted. In 2023 alone, Americans over the age of 60 lost more than $3.5 billion to scams, an 11% increase over the prior year. These scams, often powered by synthetic identities, account takeovers, and real-time social engineering, are designed to exploit the very trust and personal relationships that community banks pride themselves on.

Larger banks are pouring billions into modern fraud and compliance infrastructure to combat these threats. Community banks, constrained by legacy cores, vendor lock-in, and leaner resources, cannot pivot as quickly. That leaves them with widening exposure to losses and reputational risk, and less capacity to protect the very communities that depend on them.

Vendor lock-in and point solution sprawl

One of the most consistent concerns raised by bank leaders in the ICBA ThinkTECH Accelerator was vendor sprawl. Many shared that their fraud and compliance teams are juggling a growing number of tools that were never designed to work together. Instead of strengthening defenses, the result has been more dashboards to manage, more manual workarounds, and slower response times.

At the heart of this problem is vendor lock-in. Most community banks are tied to core bundled services and fraud vendor contracts that:

• Restrict access to the data needed to make timely, risk‑based decisions
• Require long certification timelines for even small changes
• Depend on outdated rules engines that add significant operational overhead
• Push expensive bolt-on modules instead of integrated solutions

This leaves community banks assembling a patchwork of point solutions that don’t interoperate or run in real time. For large banks with deep technology budgets, that inefficiency can sometimes be absorbed. 

But for community banks, it quickly drives up both fraud losses and operational complexity. It pulls staff away from customers and leaves institutions exposed at a time when fraudsters are exploiting gaps between disconnected systems.

If you are spending more time managing vendors than serving your customers and growing your community, the model is unsustainable.

Why community banks are so important

Community banks matter because they do what no other part of the financial system does as effectively. Nearly 4,000 community banks across the United States deliver about 36% of all small business loans and close to 70% of agricultural lending. They ensure that small businesses can open their doors, farmers can plant their crops, and local economies can grow.

They are also the backbone for rural and underbanked communities. In many parts of the country, community banks are not just the preferred option – they are the only option. When larger institutions retrench or fintechs chase scale instead of relationships, it is the community banks that stay and continue to serve.

We saw this most clearly during the Paycheck Protection Program, when community banks originated approximately 60% of all PPP loans. When speed and access mattered most, community banks led the way, delivering the majority of PPP loans despite representing less than one-third of all banks nationwide. They did it because they knew their customers, they understood their needs, and they were willing to step up when it counted.

If community banks falter, entire regions risk losing financial access and stability. The consequences would not only be felt in boardrooms but on Main Streets, in farm fields, and across small towns nationwide. That is why modernizing risk and compliance infrastructure must be a top priority. 

Ensuring that community banks have access to the same caliber of defenses as the largest institutions is not just about protecting balance sheets, it is about safeguarding the local economies that define America.

Closing the risk infrastructure gap with Sardine and Sonar

Community banks cannot be left to solve these challenges alone. The risk infrastructure gap is too wide, the threats are evolving too quickly, and the stakes are too high for rural, small business, and underserved communities. The good news is that there is a path forward, one that does not require ripping out core systems or sacrificing the relationship-first model that defines community banking.

At Sardine, we have built fraud and compliance infrastructure designed specifically for the realities community banks face today. Our approach delivers:

• Real-time behavioral and device intelligence that allows banks to identify anomalies the moment they occur, not hours or days later
• Scam and mule detection that stops fraudulent transactions before funds ever leave the institution
• Unified risk scoring across ACH, wire, RTP, and cards so teams can view risk through a single, consistent lens instead of fragmented tools
• Rapid deployment that works with legacy cores so modernization can happen quickly without disrupting the institution’s operating model

Through our Sonar consortium, we extend this protection even further. Sonar enables participating banks to share real-time intelligence on scams, mule accounts, and high-risk entities. This means that when one bank sees a pattern emerging, others benefit immediately and no one is left fighting alone. For community banks that don’t have the scale of the largest institutions, this kind of collaboration is essential.

The ICBA has long championed innovation that allows community banks to thrive without losing their identity. Partnering through initiatives like ThinkTECH is proof of that. At Sardine, we see Sonar and our modern risk platform as the next step in that same mission: giving every community bank, no matter its size, the ability to defend its customers and strengthen trust.

If you are ready to modernize your risk defenses without replacing your core, we would welcome the opportunity to partner with you. Together, we can ensure that community banks do not just withstand the challenges ahead, but lead the future of local banking.