Technology is driving banks toward being larger. As advanced technological networks are able to connect people worldwide, a banking institution is able to cast its net of services far wider than before. Because of technological advancement, no longer must a bank be limited to the neighborhood or region it traditionally has served. Through the use of communications networks, such as the Internet, customers may apply for loans, refinance mortgages and open accounts without physically walking into the branch. Because technological upgrades are expensive, the amount that banks must spend to invest in technology creates difficulties for smaller banks.
Larger institutions benefit more than they are able to spread costs over a wider customer base.
Regulatory issues also are affecting today's banking climate. The Community Reinvestment Act, or CRA, has caught fire in recent years. The CRA, which passed in 1977, mandates that regulators consider a bank's record in meeting credit needs in minority and under-served areas when considering merger applications. The law has been wildly successful, resulting in significant new lending activity in minority areas. Banks aren't at all shy about telling the world about their work within under-served communities.