I heard a comment at a banking conference last week that I have heard many times before: “We [banks] are all alike. We only compete on price.” If that attitude permeates your company or any of the lines-of-business within it, you are condemning yourself to an undifferentiated marketing approach that can only result in poor returns. Of course we also hear from other banks that say they have created differentiated approaches when in in fact they are deluding themselves. They will also likely generate subpar returns in what has become for many a slow growth and hypercompetitive market.

The self-defeating comment above resonated even more because of a recent Wall Street Journal column titled “Lenders Looking All Too Similar” that quotes a bank customer saying, “In the end, banks are really all the same.” Really? From the perspective of someone who has been able to look at hundreds of banks from the inside, my response is No! The good banks, whether big or small in size are not the same and, most importantly, their customers know it. They oftentimes differentiate themselves less by the products and services they provide than whom they sell them to and how they sell to customers. They also avoid the lemming-like rush to the latest product scheme and stick to their core business and core customers.

One of the issues that has plagued the industry and that the WSJ article highlights concerns the tendency of banks to do too much rather than too little. Ironically many banks avoid focus, one of the handful of factors that can distinguish them with their customers. UBS’s chief finance officer reflected, “We were trying to be all things to all people in all regions.” The column also quotes Mike Corbat of Citigroup saying how they are dealing with this same tendency: “We have gotten rid of many things that today would be classified as hobbies.”

How does a bank avoid being “alike” all the other banks when there are about 7,000 banks, operating in an increasingly regulated industry where deposit products and loan products are largely similar? Examples of distinctive approaches exist with banks both large and small.

• US Bancorp with over $350 Billion in assets has traveled a consistent and deliberately narrow path for decades. It operates no “hobbies”, and a recent investor report showed the bank among the top five providers (and often among the top two or three) in the 20 businesses it operates within its four business lines. How have they differentiated themselves? They have had stability both in top management and in the strategy they have been executing. They have carefully selected the businesses to develop and, conversely, those to keep away; they have always emphasized risk management and refused to stretch for growth. They are a true relationship bank, rather than a bank that claims to be relationship oriented.

• Signature Bank with about $20 Billion in assets provides another example of a bank that is not competing on price but rather in this case the expertise of its relationship management teams. The bank attracts experienced players who often have become frustrated with the bureaucracy and inward-looking focus of many big banks. Bankers can establish their own franchise and develop an annuity-like income based upon the revenues they generate. The bank’s culture and compensation encourages a very proactive banker who, rather than selling a commodity product, works to provide targeted solutions for clients, a very different emphasis. One benefit it takes advantage of is being a relatively new bank with none of the legacy baggage of many other institutions.

• A much smaller bank, Suncoast National Bank of Florida with about $2 Billion in assets has created a unit within it called Accelerate that focuses on small businesses and lower-end middle market companies. Each office can make substantial credit decisions; one additional senior signature allows for the approval of most loan requests. Speed, accessibility, and local knowledge all serve to differentiate this effort. Of course, as above, strong risk management is a key to success.

Outside of traditional banking, merchant advance lenders offer the same cash flow lending product of other banks but do so in a way that differentiates them. They are offering a service that banks could provide at least as well with a bank’s access to account information and inherent customer relationship power. However, bank concern over compliance and potential PR issues keeps most U.S. banks away from this area unlike in other countries like Brazil. The nature of the customers the merchant advance (MA) companies serve, the MA’s responsiveness and their willingness to lend where the banks will not, allows them to earn a pricing premium.

Many banks have allowed themselves to become alike, offering the same products to the same customer set. They have narrowed the credit box in which they operate, resulting in more bank competitors fighting over a limited customer set. That is one reason an increasing number of banks are focusing on lending areas such as equipment finance and asset based lending, distinctive offers that not all banks provide (yet).

Viewing yourself as being the same as your competitor is simply a loser’s strategy, one that conveys a mindset that is closed off to the creativity and focus on excellent execution that has allowed other banks to succeed. Unfortunately, we see many banks operating with a “we’re all the same” philosophy. And, today, the internal rise of the compliance people often seems to serve an excuse for inaction and limited innovation in any area, with compliance personnel and regulators sometimes providing an excuse for inertia. (The Rise of the Compliance People is a potential title for a bank-themed movie this Halloween week.)

Yes, many of the fundamental products are the same, but smart phones and autos also perform largely the same functions while maintaining a distinctive brand and attracting different customer sets. Few, if any banks, will ever have the brand power of Apple or even Samsung, but, as the best banks do, they must avoid competing as the low-priced player.