CUSB Misconception: Branches are a Dying Breed
A recent CO-OP Financial Services white paper is debunking myths about Credit Union Shared Branching. Here is an exert from the white paper that address the fifth misconception: Branches are a Dying Breed.
Misconception Five: Branches are a Dying Breed
While mobile banking, online banking and ATMs with enhanced capabilities have lessened brick-and-mortar foot traffic, branches are still important as they convey to members that their financial institution is stable, viable and focused on growth. In 2011, Credit Union Times published an article entitled, “Branch-Building Conveys Stability Focused on Growth.” Jim Haack, CEO of design-build firm Momentum, noted the importance of personal, not virtual, relationship building. “We see the branch component as the physical touch point of the strategy for building awareness that can be very difficult, if not impossible, to do online or through just a Web-based format,” he said. “The future of the branch is healthy, and institutions looking for that kind of deeper market credibility and capability are going to need to provide multichannel access to meet members’ expectations of being able to do business through the channel that suits them best at any given time.”
Even if shared branching locations do not share a credit union’s name or logo, they can be branded so members associate the two. “I have a great deal of confidence in our members that although they may physically frequent another location, they still remain our member. Shared branching just gives our member more branches,” said Pinnacle Credit Union’s CEO Lisa Williams. “Some misconceptions may exist just because now the member has several financial institution choices—there is more competition than ever before, even coming from the nontraditional institutions.”
Credit union branches and competing banks are taking a fresh approach to branch design and services in hopes of attracting members, who are expecting more from the experience. For example, some credit unions are creating a Starbuckslike atmosphere where members can receive real-time, inperson advice on mortgages, small business applications and investing, while using free Wi-Fi and accessing state-of-the-art technological components.
While it is assumed that branches are dinosaurs nearing extinction, Momentum, in association with The Financial Brand, published “Performance Analysis: Branch Network Expansion, a Five-Year Evaluation of the Link Between Branch Network Growth and Performance” that finds the opposite to be true. From 2007 to 2012, performance metrics were studied for credit unions that added branches against those that did not. For the former, asset growth, member growth, loan growth and ROA all increased.
Across all asset groups, credit unions that increased their branch network by at least one branch had an asset growth rate two times greater than credit unions that did not increase network size. Seventy percent of credit unions that increased their branch networks had positive increases in membership. For those credit unions with assets greater than $1 billion that added at least one branch between 2007 and 2012, 55.26 percent had a return on assets (ROA) higher than the peer group that did not add one branch in 2007 versus 44.07 percent in 2012. The report also found that credit unions that increased
branches increased loans originated per full-time employee (FTE) by 12.32 percent, whereas credit unions that did not increase their branch network had a decrease in loan origination per FTE of negative 15.22 percent.
With 22,000 members, 40 employees, two branches and $120 million in assets, the Hammond, Indiana-based REGIONAL Federal Credit Union has been active in shared branching since the early 1990s. President and CEO Jill Banning noted that without shared branching, the credit union would not have been recognized in recent years for its overarching service. “The most exciting experience for REGIONAL is winning the Best Business award two years in a row in a city in which we have no physical branch!” said Banning. “We introduced the community to REGIONAL using local shared branches as our delivery system. Our penetration in the community dramatically increased and we were recognized by the Chamber of Commerce.”
Both the Momentum report, which speaks to the financial benefits of branching, and REGIONAL Federal Credit Union’s award-winning service, are proof-positive examples that branches pay dividends and enhance member relations.
Click here to read the entire white paper.
Click here to learn more about Shared Branching.