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Branches: Expensive Experiences?


July 2014 – Vol: 37 No. 7
by Lisa Hochgraf

Best practices for CUs trying to manage the costs of physical locations as branch transaction levels continue to drop

July 29, 2014

Illustrations of scenes of customers and workers in a bank branchEric Weikart and Sam Kilmer think credit union CFOs and member service VPs may be having some pretty healthy arguments about branch investments these days.

A CFO might say: “Come on! Branch transactions flattened and we just bought that online account opening app. We have to be sustainable and accountable to members! Can we really spend any more on branches?”

In turn, the member service VP might say: “Enough of the jargon! We need to grow the credit union through better member engagement in the branch so members use more of our services.”

Weikart, managing director, and Kilmer, senior director, of CUES Supplier member and strategic provider Cornerstone Advisors Inc., Scottsdale, Ariz., said they think the comments of both executives have merit.

During last Thursday’s CUES Webinar, “The New Branch Imperative,” Kilmer and Weikart noted that branch transaction volume is continuing to drop significantly and that members and potential members still care about whether their financial institution offers a physical location near them. Then, the pair offered best practices CUs can put in place to make the most of their investments in traditional brick-and-mortar locations.

According to data from the most recent The Cornerstone Report: Benchmarks & Best Practices for CUs, median branch transactions for CUs have dropped to about 7,000 in 2012, down from about 11,000 in 2008.

“This is an early indication,” Weikart said. “As we look at 2013 and 2014 and predict transaction volumes, we’re going to see an even more drastic drop.” In turn, this means that the cost per branch transaction is going up.

Some key factors pushing this drop in branch transaction volume include the widespread adoption of mobile banking, and clunky processes negatively impacting the member and employee branch experience, they said.

But according to data from Bancography and the Federal Reserve, having a branch nearby is still important in how people choose their financial institutions, even among people who are heavy digital users. This data also shows that 2013 was the first year financial institutions opened more branches than they closed since 2010.

“We’re trying (as an industry) to meet that need that people like to know there are branches out there,” Weikart said. Notably, the branches financial institutions are putting in place today are often smaller (2,000 to 4,000 square feet compared to 10,000 square feet) and less costly to operate (by 40 to 50 percent) than traditional branches, according to a Wall Street Journal article cited by the presenters.

“As you are thinking through your strategies not only for branching and channels, but for the whole credit union, we think it’s important to take a stand on your whole strategy,” Weikart said. “How do you aim to deliver? How do you intend to lead the member and provide a delivery mix? We think it’s important to figure it out and make decisions.”

By 2020, the vast majority of CUs “will be originating the majority of your accounts online,” he continued. “This doesn’t mean you won’t do any in the branch, but we say take a position along the (branch investment) continuum, and make your decisions and investments accordingly.”

Weikart and Kilmer identified these four key attributes of CUs doing a good job of making the most of the dollars they spend on branches:

  1. Focus on sales vs. operations.
    –Hire sales-minded individuals. For example, today’s branch managers may spend as much as 50 percent of their time outside the office. They are sales people bringing in new small business loans and other loans within a mile to two-mile radius of the branch.
    –Make it easy to cross sell. In one or two clicks, can your staff find out what is the next product this member is likely to buy? Be sure to have staff enter feedback if the member doesn’t want the product offered, so it won’t be presented to the same person again right away.
    –One-and-done for maintenance tasks. For example, instead of having front-line staff send requests to change a member’s address to the back office, figure out a way for front-line staff to make the update on the spot.
  2. Have the right mix of employees to keep them productive.
    –Consider staffing options for your unique branch, including universal agents, specialists, peak-time employees and part-time employees.
    –Have tasks for employees during slow times. For example, when the teller line is slow, tellers could support incoming calls to the call center. This can help keep staffing costs down.
  3. Understand the difference between risk management and risk elimination.
    A credit union might eliminate certain risks by requiring a wet signature for every transaction. However, that’s not the most efficient process and a lot of CUs choose instead to manage these risks by requiring wet signatures for some transactions and not for others.
  4. Leverage technology.
    –Know what branch technology is available and which is right for each of your branches. Consider cash recyclers vs. dispensers, instant issue  cards, paperless workflows, signatures pads, and integration of systems. “As you make such investments, make sure there’s a payoff,” Weikart advised. “If you’re investing in new technology, you probably want to go straight to the recycler,” unless you have a lower-volume branch with a traditional teller line. “Use technology to drive efficiencies and measure that.”


Lisa Hochgraf is a CUES senior editor.

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