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By CO-OP Financial Services
With the prevalence of wireless devices like PDAs, cell phones, BlackBerrys, and the new iPhone, today’s consumers literally have everything at their fingertips. They can instantly download music to a computer or cell phone instead of hiking to a store to buy a CD. They can pay bills online with the click of a button. What it all boils down to is convenience – consumers want to access what they want, when they want.
This desire for convenience isn’t limited to gadgets and technology. I’m sure you’ve noticed that the number of bank branches in the marketplace are increasing. Banks caught wind of the important role locations and convenience play in determining whether or not to join a financial institution, and they took action. As a whole, most credit unions don’t have the luxury of allocating funds to build new locations, but that doesn’t mean we can’t compete. Indeed, shared branching is a cost-efficient solution for credit unions to increase their number of locations.
Shared Branching is Economical
While online banking has increased in popularity, not everyone feels secure handling their money over the Internet, and some people just prefer seeing a friendly face in a branch. Between construction costs, phone and electric bills, staff salaries, and other expenses, building and maintaining new branches is expensive.
Additionally, the majority of credit unions cater to localized populations. Building more branches in your community may please some of your constituents, but it isn’t necessarily ideal to reach members who have relocated and want to stay with your credit union.
Shared branching addresses the issues of cost and increasing locations by allowing a credit union’s members to perform a variety of financial transactions at another credit union’s facility. With buildings and staff already in place, this eliminates the need to build new branches and gives your members access to more locations. Members of credit unions that participate in shared branching have access to 2,400 locations nationally.
Shared Branching is Convenient
Branch locations enhance your members’ perception of how convenient your credit union is. Students who attend schools in other cities or states, members who commute long distances to work, and “snowbirds” who winter in warmer climates are some of the members who aren’t always able to use their neighborhood branches. With shared branching, they still have brick-and-mortar locations they can walk into and feel like they’re at home.
The Next Generation
The concept of shared branching has existed since 1975, so it’s a bit surprising that more credit unions don’t take advantage of it. Shared branching is a convenience that banks won’t offer because, at the end of the day, they answer to investors who want a bigger bottom line than the next guy. If all credit unions participate in shared branching, we have the potential to collectively offer our members access to more than 8,000 branches nationwide (as compared to Bank of America’s 5,700 branches or Wells Fargo’s 4,100). But we’ve all got to work together.
We need to remember that shared branching is an opportunity to strengthen our movement. Ideally, one day any credit union member would be able to walk into any credit union in the country and still access their money… surcharge-free. Wouldn’t that be convenient?
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August 6, 2007
7/26/2012 04:03 PM
From the contrarian point of view, although my CU is an investor and participant in shared branching (not my decision), the concept, when one steps back and takes a really objective view at it, is really a colossal and profoundly expensive step backward. As an industry, we''ve spent billions of dollars building an incredibly efficient and effective electronic system that virtually eliminates the need to physically visit one''s financial institution for anything. And it works unvelievably well. Yet, again as an industry, we spend another fortune, and, in the process, effectively reward bad behavior on the part of those who choose to conduct their financial affairs not unlike their grandparents. How stupid is that, not only of those members, but of us?
There are more than 8,000 credit unions in the United States. How does this translate into "access to more than 8,000 branches"??? I know many credit unions that have more than one branch each. Hollen should check his math. And, contribute something less superficial than this!
7/26/2012 04:02 PM
Concerning the comments made so far: IS it possible that the "anonymous" commentors are newcomers to the credit union world? Shared branching is working because millions of consumer/members LIKE face to face contact and locational convenience. Not everyone uses instant messaging and wifi and until everyone does, there is a place for Shared Branching. Why do you think banks are still building branches at a prodigous rate after these same kinds of predictions were made many years ago that branches were "obsolete". When I first joined the movement the speakers at every conference were predicitng a "cashless -checkless society" within 10 years. Its now been 30+ years and the number of checks cleared is only now finally going down. Consumers have inertia, not everyone is an "Early Adopter".
Comment #4 does make a good point. Shared Branches could and should use technology to provide more CU specific help to members who use them regularly. However, stating the obvious that the majority of the transactions could be done cheaper electronically is meaningless if the members do not choose to use that method.
Shared branches are transaction based. You don''t make loans, you don''t solve problems, you can''t cross sell (you may actually end up cross selling a competitor) and you seperate your member from the brand and unique experience of your credit union. The majority of transactions done at shared branches can be done electronically for less money.
I would add that, in reference to Comment #4, shared branching may not generate new loans, but can certainly contribute to keeping existing ones when members relocate. We could go on and on about how the industry shouldn''t need this technology, but there is a demand for it, it''s meeting needs that ATMs are not, and is much cheaper than building new branches.
I think the point of shared branching is to give members the option to access their money the way that they want to do so. I use home banking to do almost everything; my father wouldn''t use it if you gave him a computer (and you would have to) and gave him a $100 to do so. He is one of the people who are in the "won''t" category, and the "won''t" category is a large one. Credit Unions have to find ways to compete and shared branching is an opportunity to do so. As an employee of a military credit union, I can also say that I would rather lose (if I am going to lose) a member to another credit union than to a bank. Yes they may go into a credit union to perform a tranaction and decide that they like them better, but the opposite is true as well. This is a big picture problem so please don''t look at from just your (or mine for that matter!) point of view.
Shared branching while a nobel idea may be one of the biggest downfalls in the industry when it is said and done with. Yes, consumers like to deal directly face-to-face and we have to find a way to do that but certainly the banks will not collude and there are key reasons for this. Where is public disclosure on where the fees go? Maybe CU Times, CU Journal, this column or elsewhere will help disclose.
The bulk of shared branching transactions are deposits. The one thing that many credit unions cannot or will not do online.
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