Where goest the branch?
There has been considerable debate on the future of this traditional delivery channel. One argument has the branch slipping into oblivion due to the Internet and electronic services. Another predicts a much smaller branch that could resemble the mobile phone shops sprouting up in malls.
The branch is here to stay, but the look, feel and function are evolving. Economics, technology and consumer behavior are driving this progression, according to a new white paper, "Is Technology Causing Branches to Close but Service to Thrive?" from CUNA's Technology and Operations, Sales & Service councils.
Economics becomes the great leveler when it comes to most human activities and the branch is no exception. The $435-million Air Academy FCU, Colorado Springs, Colo., illustrates this notion. The organization had 13 branches in 2009 before closing five branches over the next three years because members were no longer using the branch as much as in past, says CEO Glenn Strebe.
The economics of alternatives to building a branch are compelling. It takes an estimated $1 million to $2 million to build a branch and, with a staff of five to eight people, an additional $350,000 to $400,000 annually to operate.
"Instead of the expense of building a branch, why don't we put those resources into improving electronic services?" says Strebe. "When I ask CEOs how they would construct their credit union if they were to start over, they say they not create a large branch network; rather they would create self-service with employees to help members."
Consumer behavior, not technology, is the primary indicator of branch changes, according to Brett King, CEO and founder of Moven, New York, a mobile direct banking platform, and a frequent speaker at CU events. He points to the following numbers:
* Average monthly transactions in branches for credit unions, community banks and commercial banks was 11,500 in 2000; in 2012 that number dropped to an estimated 5,400, according to Novantas and FMSI.
* Average annual visits per retail customer or member per branch was 23 to 27 times in 1995; that number dropped to 3.2 times annually by 2012, according to User Strategy Limited.
Technology is having an effect on the branch, but it tends to supplement rather than supplant functions. An good example is the $2.1-billion Coastal FCU, Raleigh, N.C., which added personal teller machines in 2008 that allow the member to do just about everything a teller can do. Coastal currently has 63 PTMs and 30 ATMs, according to Joe Mecca, senior marketing analyst.
Coastal's Personal Teller Machine system allowed CCU to become the first FI in the world to transition to a 100% video banking system, according to Celant.
The PTM has a video screen that shows a live video feed of the teller, who is remotely located in a central location. The teller sees a live video of the member as well. The PTM scans the member driver's license for identification and the member inputs her account number on a virtual keyboard. The machine scans checks for deposits. The transition for the members was seamless.
"We started with remote tellers in 2002, so the transition to PTM branches was easy," Mecca says. "Members were used to remote tellers."
The PTMs are open seven days a week from 7 a.m. to 7 p.m. and have led to a 40% reduction in teller costs while at the same time expanding teller hours by 86%, Mecca said.
The Elephant in the Lobby
Mobile banking is the elephant in the lobby; it will dominate financial services in just two or three years, according to King, who predicted that by 2016 transactions will be completed in the following order of importance-a reversal of the current ranking: mobile phone, Internet, ATM, call center, and branch.
Consumers are accustomed to using mobile apps for basics such as checking balances and transferring money. More complex transactions have had a sluggish start. The $ 65-million First Financial CU is among those that provide an application that allows members to complete a loan via their smart phone or tablet.
The member fills out her name, type of loan and amount. A camera in the app takes an image of the pay stub or relevant document. The member signs the application and sends it back to the credit union. A loan officer contacts the member in one day with the decision.
If approved, the member gets the loan documents sent back to the mobile device and signs the form via DocuSign.
But doesn't sending an overflow of loan documents to a mobile device seem burdensome? "Yes, but for the member who wants ease of access it works well," says CEO Patrick Basler. "We've had zero negative feedback since we offered this loan app at the end of 2012."
On the first day it was available, 60 members applied for a loan through the app. In a normal month, First Financial has about 100 loan applications. During the first month with the mobile app, they had 280 loan applications, according to Basler.
First Financial has seven branches. Two are community based while five are one-employee branches located inside SEGs. The one-employee branches are full service, which requires extensive education and training for staff. Every Tuesday FFCU closes for 90-minute training sessions on new products and services.
The Other Kind of Common Bond
A common bond that the leading innovators share is that member and staff education-especially concerning technology-is critical to the organization's success. Financial services professionals sometimes overlook that consumers are frequently befuddled and intimidated by new technologies. After experiencing years of wading through badly written instruction manuals, a number of consumers have tech-anxiety about the latest offering.
A number of high-tech credit unions have greeters with iPads explaining how to use the technology as members walk in the lobby. Education is, of course, one of the missions of a financial cooperative, but it's also critical for acceptance and ultimate success of any innovation. The branch continues to be a suitable venue to educate members. Online resources are also a vehicle to teach and train. If employees are comfortable with the technology, member acceptance will follow.
Jim Jerving is a freelance writer based in Madison, Wis. He can be reached at firstname.lastname@example.org.