DEFINITION of Niche Banks

Niche banks cater to and serve the needs of a certain demographic segment of the population. Niche banks typically target a specific market or type of customer and tailor a bank's advertising, product mix, and operations to this target market's preferences.


A good example of a niche bank is the Golf Savings Bank, which sponsors golf tournaments and offers up to $10,000 for PGA members who score a hole in one and have a specific account at the bank.

Other examples of niche banks include Reid Temple AME Church Federal Credit Union, which has convenient hours before and after church on Sundays, along with BowieBanc, which offered an automated teller machine (ATM) card with a picture of David Bowie before it shut down.

Niche Banks and the Federal Deposit Insurance Corporation (FDIC)

If you are considering a niche bank, it is important to make sure it is FDIC (Federal Deposit Insurance Corporation) insured. Created in 1933, the FDIC insures deposits in the United States against bank failure. Today, the FDIC insures deposits of up to $250,000 per institution for all member firms.

The FDIC usually covers 100% of member checking accounts, savings accounts, certificates of deposit (CDs) and money market accounts. While the FDIC may at times cover aspects of some trust accounts and individual retirement accounts (IRAs), they do not cover investment products, such as mutual funds, annuities, life insurance policies, stocks or bonds. Nor are contents of most safe-deposit boxes included in FDIC coverage either.

It is also important to ensure that the niche bank is a separately chartered entity and not affiliated with a bank where you currently have deposits. This is due to the fact that the FDIC generally limits deposit insurance to $100,000 per person per chartered institution.

Niche Banks and Commercial Banking

Niche banks are usually types of commercial banks, which accept deposits, extends loans (business, personal and mortgage), and offers basic financial products like certificates of deposit (CDs), checking, and savings accounts to individuals and small businesses.

Most niche and commercial banks stand in contrast to investment banks, which specialize in larger and more complex financial transactions. These can include underwriting, being an intermediary between a securities issuer and the investing public, facilitating mergers and other corporate reorganizations, and acting as a broker and/or financial advisor for institutional clients.