Figuring out how shared branching fits into the mix of ways your credit union serves members is a bit like juggling a bowling ball, a lighted torch, and, oh, maybe, a cream pie. It’s … complicated.
First off, members appear to finally be getting the message that they have convenient access to branches across the country—and a cool smartphone app to help busy travelers find the nearest location. On the other hand, members who speak “app” are also discovering—and embracing—remote deposit capture, and they’ve got fewer checks to deposit anyway.
Then there’s the issue of how members are thinking about why and when they need to visit a physical location—and you probably are pondering those same questions. If person-to-person member service is more about having a conversation than performing a transaction, how does the transaction-only nature of serving other credit unions’ members in your branches fit into that picture?
Branches in Transition
Keeping all these issues in the air is at the center of the challenge of branch network optimization these days, and technology and new approaches to facility design may offer some solutions, says Paul Seibert, VP/financial design for EHS Design, Seattle.
“Branches are transforming to be more of a center for member advocacy, moving from transactions to interactions,” Seibert notes. “If that is the case, how does serving nonmembers come into play? Because they are there to conduct transactions at the same time we are looking for ways to minimize transactions in the branch.”
And yet, shared branch revenue can mean the difference between whether a new branch generates profit or just more expenses. “You can use the transaction income as a branch starts up in a new market, and then as the branch grows with its own membership, that becomes less important as it becomes self-sustaining,” he explains. “If you are expanding your network, you can look to shared branching as something that is going to support you initially in new markets.”
CO-OP Shared Branching can help credit unions forecast guest member traffic as they scout new locations, says Sarah Canepa Bang, president/chief operating officer of FSCC, LLC, and chief strategy officer for CO-OP Shared Branching, a business unit of CO-OP Financial Services, a CUES Supplier member. “We know how many shared branch members there are in any kind of radius in any given month, so you can see how much money the branch might bring in and how many transactions you might be doing.”
The CO-OP network has seen a decline in the growth of deposits at its 5,000 branches across the country, likely due to remote deposit capture and other e-services, but overall the number of shared branch transactions continues to increase as more members discover the convenience of this service, Bang says.
Routine transactions may be migrating to remote channels, but the need for brick-and-mortar facilities is not going away, and shared branching can help credit unions underwrite the costs of their most expensive—and visible—service component.
“As branches become more and more expensive—and they clearly are the most expensive way to serve your members—you still need them for continuity and those odd instances when somebody needs to come in to resolve a problem,” she says. “That’s not a great reason to build a branch, but it is a perfect reason to be a part of shared branching so you can earn transaction income from guest members. Especially since the economic crisis has left everyone tightening their belts, shared branching can provide a safety net for branch operations.”
An additional step in formulating your shared branch strategy is to assess the level of acceptance of this channel in your market area and plan accordingly, says Eric Weikart, managing director with CUES Supplier member and strategic provider Cornerstone Advisors, Scottsdale, Ariz. Shared branching is much more accepted in some regions, like California and the western United States, than in others, which may influence the rate at which shared branching transactions increase or decline as a result of other factors.
Getting a firm handle on the amount of shared branch traffic anticipated at a new location influences everything from branch size and layout to the amount of parking you’ll need. For some of the credit union clients EHS Design works with, shared branch transactions account for 30 to 40 percent of the traffic in some locations; for others, it’s more in the range of 5 to 10 percent.
If technology adds to the uncertainty about the future flow of branch traffic, it also provides credit unions with new delivery options in the form of video tellers and kiosks, which could offer an efficient means of providing shared branch access to nonmembers, Seibert suggests. If all a guest member needs to do is handle a transaction as quickly and conveniently as possible, “virtual tellers” may be the answer.
Video tellers and smart ATMs are still new to the credit union industry, so it will be interesting to watch how and where these devices are positioned in and near branches and how members relate to them. Some California credit unions have taken advantage of their enviable climates to station video tellers in sheltered outdoor spaces so members can enjoy the fresh air instead of waiting in line inside, he notes.
Optimizing the use of these technology tools inside offers some intriguing possibilities as well. Credit unions are rethinking branch layout based on the range of member interactions: Members and nonmembers after a quick transaction can stop by a video teller near the front of the branch, while members with more intensive financial services needs can head further into a lobby laid out to facilitate personal conversations.
CO-OP Shared Branching is working with credit unions that have branches with heavy guest member traffic to install next-generation ATMs. The aim is reducing long lines at teller counters. “There’s no denying that getting an extra $1,000 a month is helpful for some of these branches, especially if there’s an option to support service if tellers are getting maxed out,” Bang says.
Once shared branch users try kiosks and full-service ATMs, they may actually prefer them to stopping by a teller, she adds. An additional service component credit unions in the CO-OP network can add to the mix is the kiosks from Vcom (a division of Avanquest) at 7-Eleven convenience stores around the country. The network currently has 2,200 kiosks in place and plans to add another 1,000.
Interest in such branch automation as video tellers is growing, Weikart agrees. It may be difficult to justify investing $60,000 just to conduct shared branch transactions, but if both members and nonmembers embrace this technology, it could have a significant positive impact on branch service levels.
These innovative design options not only aim for more efficient service delivery but also to head off the specter of disgruntled members thinking, “I’m stuck in this long line because of all these shared-branching people here, and this is my credit union,” Seibert notes.
Some branches with concerns about heavy guest member traffic have experimented with express “member only” teller lines and shared-branch-only lines. Member-only lines seem more successful than guest-only lines, which might send the “wrong message” to guest members, Bang says. In the balance of serving members and nonmembers at shared branches, a guideline worth considering might be a variation on the Golden Rule: Serve other credit unions’ members the way you would want your members to be served elsewhere.
CO-OP Shared Branching specifies that participating facilities be open to guest member transactions five days a week, but Saturday shared-branch access is optional. When credit unions close their branches to guest transactions on Saturdays, the network sees spikes in traffic at 7-Eleven kiosks, Bang notes.
One other efficiency issue some credit unions have encountered in conducting shared branch transactions is system slowdown. If there is a significant difference between processing internal and shared branch transactions, “we can fix that,” Bang says. “Core systems have gotten a lot smarter at this in the last 10 years, but occasionally somebody will tell us it takes much longer, and we can go in and find out what’s going on with the interface.”
More Questions Than Answers
In short, branches are evolving from large stand-alone facilities with drive-up lanes and teller counters to smaller, high-efficiency centers staffed by universal associates offering personal financial guidance in one area and video technology, cash dispensers/ recyclers, and uber-ATMs in a separate self-service zone.
In the near future, these pieces may be reshuffled yet again. Seibert advises credit union executives to monitor trends toward further reductions in the flow of paper checks and increasing reliance on mobile and electronic service delivery. The pace of these shifts will raise more questions, and the answers will vary for each credit union based on your members’ preferences for electronic vs. personal service: What will be the purpose and objective for the branch in your member service strategy? What will a new branch look like? What technology will it deploy? And where does shared branching fit in?
At the heart of that final question are the additional considerations of how your credit union contributes to the efficacy of the shared branch network by opening your branches to nonmembers in exchange for being able to offer cross-country branch access to your own members.
As member service patterns at branches continue to transform, credit unions might need to consider some new alternatives, such as partnering with other financial cooperatives in your service area to create a shared branch location, Weikart suggests. That could be an efficient means of processing transactions without making a significant long-term investment in individual facilities.
The More Things Change…
With the steady shift to e-payments, money is less and less about a physical exchange, but many members still value a personal connection with the institution that handles their finances. The challenge for credit unions is envisioning the best way to maintain that connection. Seibert uses the term “focused advocacy” to describe a member service philosophy of building individual relationships with members to better understand and deliver the financial services they need. This approach requires highly trained front-line staff with a thorough understanding of how to match member needs with the credit union’s array of products and services.
“If you are ‘living the brand’ to members, that is very productive, but if you are living the brand to nonmembers who you have no expectations of converting, is that a good use of resources?” Seibert asks. “Probably not, so you may want to figure out how to deliver shared branch services in a different way.”
No matter how cool technology becomes, some people will still have a “psychological need” to interact with the people handling their money, and shared branching is a key component in providing those personal interactions, he adds. “I think technology is going to do great things for member service and will probably reduce the need for shared branching on some level, but there will always be a need for it and it remains a great idea.”
How Do You Serve a Million Members? (As efficiently as possible…)
Only two of BECU’s branches, called Financial Centers, offer full teller services.
Karen Bankston is a long-time contributor to Credit Union Management and writes about membership growth, marketing, operations and technology. She is the proprietor of Precision Prose, Stoughton, Wis.