What is the future of the credit union branch? This is the topic of ongoing strategic debates. Most of these debates are fraught with emotion. Some of these debates pivot around pride in having a display of a brand presence. Many of these debates are driven by a lack of wanting to see the reality of the banking habits of consumers. A few of the debates are focused on wanting to be everything for everyone and ignoring the reality that members who are branch dependent are a dwindling minority.
Let’s remove the emotions, the wishful thinking, the ego, and the thinking from the gut for a moment. Let’s ignore the money invested in retail space, equipment, and staff. Let’s sidestep the high-touch, high-tech arguments. Let’s look at what we know, not what we think.
A common argument for branching is, “Our members want to talk to our tellers.”
Really? We like to think that is true but is it? Let me ask you this, when you observe member behaviors, expressions, and body language as they enter a branch, do they look excited to be there? I have rarely seen a member drive to a branch, park their car, walk into a lobby, sometimes with kids in tow, happy. Sure, they, for the most part, are polite and smile when smiled at, but they are there because they HAD to be there to do something, not because they wanted to see a teller or liked your coffee. Even at drive through services. Did they really want to face traffic, maybe make a left turn, maybe sit in a queue of cars to do something because they could not do it another way more conveniently? Think like a consumer, not like a banker.
Over the past couple of years of COVID, we realized that a vast majority of our members became accustomed to using digital and mobile access. The consumer’s comfort level with managing the details of their lives, like banking, transitioned to remote channels. Does it make sense that the ONLY reason a member comes to the branch is because what they wanted to do was either too clunky or not available through the online or mobile channels? Forcing your members to do something they don’t want to do (like drive to a branch) because you will not provide them the ability to do it more easily is not a sustainable strategy.
A recent survey found that only 8% of consumers prefer to bank at a branch. The majority prefer the mobile app or online. 8% is a small universe. According to a Forbes study, “The majority of Americans (78%) prefer to bank digitally (via mobile banking app or bank website).”
Knowing these statistics, what is the future of physical branches?
I’m looking into my crystal ball right now, and here is what I see.
Branches may soon be a luxury, not a necessity.
One progressive credit union, Alliant, decided several years ago to go branchless. In reviewing their call report and key ratios, they seem to be thriving. Recently, another credit union looked carefully at their data and learned that branches seemed unnecessary. Less than 5% of their members regularly visited a branch. Not only did they look at their data with an open mind, they made the bold decision to act on what the data was telling them. They closed all branches and moved to a digital-only, not digital-first, but a digital-only model. Their research indicated that this decision affected less than 5% of their members. Let’s face it; the writing is on the wall.
The question we need to ask is, “Why are credit unions still building branches and not closing branches?”
The costs of opening and then maintaining a branch are high. Sure, some credit unions are transitioning to smaller branches with smaller staff and using ITM or similar technology as an alternative to the historical branching concept. Do we honestly feel this modification is an acceptable compromise?
In my crystal ball opinion, credit unions are not making bold decisions when they continue to expand via a branching strategy. It would appear the branch is so ingrained in their DNA that they cannot see a future without it, even when the data tells them that branches are NOT what consumers prefer. When a credit union chooses to expand into a new market, they should take the lead of other digital retailers and invest into marketing and digital branding tools to create a market presence. Even if this marketing and growth expense was equal to the cost of a design-build of a branch, the ongoing costs of staff and maintenance of a branch would be mitigated.
Additionally, if credit unions repurposed the money they are spending to maintain branches into a better, more engaging web experience, better mobile and digital functionality, expand more services that historically required branch visits into digital experiences, better chat and virtual connection with support staff, and better virtual, video, and digital communications, they would deliver more of what consumers want – easy, fast, streamlined access to their accounts and balances with virtual access to knowledgeable support staff, 24/7.
Is it time credit unions take bold steps with bold decisions? I offer a challenge to credit union leadership and Boards, do a deep dive into the analytics and talk to their membership. Learn how are they using your credit union today, and how do they want to access their accounts and balances in the future. Learn on who is depended solely on the branch. How significant is this members segment? But, along with learning who, learn why members are at the branch. Is it because they are unable to do what they want with mobile or online tools or are the mobile and online processes too difficult, cumbersome, or clunky.
Most credit unions will find that those members that are 100% branch reliant are not the membership segment that represents the credit union’s future, they only reflect its past.