MILWAUKEE - The new year represents a chance for credit unions to take a close look at their branch networks and identify areas to cut costs as well as look for opportunities for growth.
That was the message from sources at major design/build firms that serve the financial services industry.
Both Jim Caliendo, president and chief operating officer of Pittsburgh-based PWCampbell, and Ralph La Macchia, president of La Macchia Group, here, said step one is to plan ahead.
"The evaluation of the branch network is first," said Caliendo, who said facilities are often "overlooked" and not maintained. "There is a good opportunity to cut costs and increase performance of the branch network. There could be mechanical issues, and/or there could be places to spend less on utilities."
La Macchia said CUs need to have a strategic plan that has been "well thought through."
"It is important that credit unions know the people they are going to serve. They are being far more selective in where they are building branches," he said. "The lion's share of the people we see understand you don't just 'build it and they will come' anymore."
Smaller = Better
One recent trend that is expected to continue in 2015 is the use of smaller branches.
The purpose of the branch has changed as direct deposit, ATMs and -- more recently -- mobile banking, have largely eliminated the need for counters with 20 teller windows.
Caliendo noted he worked in banking prior to getting into the design/build business.
"I remember looking at facilities with no less than 4,000 square feet. Now you can do with a 2,000-square-foot branch. That means less costs. There is no question facilities have to get smaller, have more technology, be more engaging and be educational," he said.
Many FIs are cutting back on staff by going to a universal approach, Caliendo continued. This means one person can perform teller duties, open new accounts and take loan applications.
"There are obvious opportunities to encourage members to do more self-service tasks for everyday transactions," he said. "Branches need to integrate technology to increase self-service. Coupled with that is the opportunity to have technology in branches to teach people on a point-of-sale basis to use online banking. That can be done when opening accounts."
La Macchia noted that branches are getting smaller, adding CUs are realizing benefits by being the anchor tenant in a retail node - along with a grocery store or a gas station.
"In the past they might have shied away from that space because it was too much money, but now they are coming up with ways to be more creative. They used to be the homely attendant at the high school dance, but they have gone to the gym and paid more attention to their outfit, and now can pose a very robust alternative to existing financial services firms in the marketplace."
Financial services need to be "more appealing," according to La Macchia, which requires paying attention to the people CUs want to get through the front door and being welcoming once they are in.
It does not have to be a bigger facility, La Macchia explained, but it needs the "flexibility and the environment" that allows the credit union to provide a multitude of services in a smaller area, he said.
"Retail space is so expensive, credit unions cannot squander space," he said. "They have to distract people from what they are thinking about when the walk in the door and then focus their attention on financial services. Many people are on their phones and texting. The overload on the senses is enormous. The facility should create a moment of repose by getting their attention. If they are in a hurry, give them what they want, but try to let them know what is available to them."
According to La Macchia, there are a variety of strategies to optimize branch usage, as long as they remember that one size does not fit all.
PWCampbell's Caliendo said electronic marketing allows CUs to augment their advertising, is easily customized and boosts sales opportunities.
"Retail outlets do mass media advertising, then when people walk in they get that same message," he said. "If the staff then delivers that same message it gets the point across."
Expanding Footprint Through Branching
Caliendo advised CUs to increase their market share through facilities in the year ahead. He acknowledged that building more branches can be a "scary thing" because executives will look at the cost, but said they need to remember the big, top-heavy branches are a thing of the past, as are FTEs, full-time, equivalent employees.
"People will use online banking, they will use their phones, but they use those for every day, routine transactions. People still know what their credit union is by where the branches are," he asserted. "Many credit unions are opening new facilities, but they are small, smarter, technology-driven, high-performance branches."
Caliendo said SEG-based CUs should look at opportunities to add a community charter. "That allows credit unions to expand their geographic footprint."
According to La Macchia, there are many different reasons to build a branch - both offensive and defensive, depending on the marketplace. "I do not see branches going away in my working lifetime. It has to make economic sense, but there still is a value in the personal relationship."
Mobile banking will continue to increase, La Macchia predicted, but he said the credit union still must see itself as a "conduit" for financial services. "People will have problems and will need their credit union to advise them."
Caliendo said no matter what credit unions do - invest in an existing facility or open a new one - they need to look at the demographic of the market before taking any steps.
"They need to know when they will recover their return on investment. Drive-ups are important because people don't have time - they don't want to get out of their cars any more. Another development is teller pods and cash recyclers, which allow employees to be in the open, offering an opportunity to talk with people.
La Macchia said he is "optimistic" about 2015 and beyond, but said CUs need to hold on to what makes them different from banks.
"Credit unions gained market share through the downturn, and we will continue to see mergers," he said. "There are a lot of great stories at small credit unions, and it is important not to lose those. We recently worked with a $100 million credit union that originally was municipal employees. We represented each of the groups that came together to charter the credit union. Credit unions need to take advantage of the fact they are local, familial. As we go into 2015, keep those elements that make a credit union special, even after a merger."