Don’t draw a line in the sand with your branch network just yet. Online delivery channels may provide cost-effective transactions, but the jury is still out on whether they can substitute for branches as a relationship builder, especially for advanced product offerings.
In a 2008 Deloitte study of Belgian bank customers, 70% or more said they would “certainly not” apply for credit or loans, mortgages, investment products or retirement products through online or phone channels alone.
You need a variety of contact points to stay competitive, but you need to make sure each channel is being used efficiently for sales and service. If you’re investing in high-cost delivery channels like branches, you should be seeing more than just transaction activity. You should see deeper financial relationships.
“Members want to use multiple delivery channels, but that makes for expensive cost structure,” says Lisa Ginter, executive vice president and chief operating officer of CommunityAmerica Credit Union ($1.7B, Kansas City, MO). But you can’t be everything to everyone in every channel.
“While routine transactions can be easily managed by technology and the utilization of other channels, that’s not the case for financial advising and the selling of advanced products like mortgages and investments,” Ginter says. That’s where branches have the advantage.
As part of its decade-long strategy of aggressive development, CommunityAmerica Credit Union has invested substantially in its physical locations as a key source of holistic relationships. From just 5 branches to its current 32, the credit union has grown quickly in the past 10 years, but more importantly, it has grown smart in new markets.
“We’re in the business of people and relationships, and we believe for relationships to begin, face-to-face interaction is critical,” Ginter says. But acquiring new members through a branch requires more flexibility than serving an existing population. To get eyeballs, you need to be convenient. To stay viable, you need to be efficient. CommunityAmerica does both by leveraging diversity in its branch structure.
“Anywhere you live or work in this market, you have the perception that our branches are everywhere,” Ginter says.
The credit union continues to rely on the strength of its traditional, full-scale branch model, with its capability to serve large numbers of members quickly, extra space for advanced services, equipment and features, and the feeling of a centralized community hub. “These may not be as elaborate a structure as we have built in our past, with community room and all that, but they are still full service,” Ginter says.
Yet CommunityAmerica also uses the advantages of a smaller in-store setup, with smaller operations cost and the chance to capture existing traffic flow. “In every market, we need the anchor of our brick and mortar branch, and then throughout that market, we need cost-effective in-store locations,” Ginter says.
The credit union’s current and future network will be equally divided between these hub-and-spoke branch styles.
With in-store partnerships held at numerous Wal-Mart and Hy-Vee locations, “the credit union has a lobby of 30,000 people who come in every week, so it’s a great business development opportunity,” Ginter says. “They’re also open seven days a week and later in the evening than the rest of the branches.”
As the relationships continue to develop, the branch employees help encourage members to move daily transactions to less expensive options, which improves efficiency and waiting times. “You need to continue to be in tune with transaction patterns because they can change your branch strategy,” Ginter says.
For example, if fully staffed branches are not living up to their potential in specific markets, managers are tasked to go out and create activities, like financial workshops or bank-at-work events, and find ways to get business to come to them, instead of waiting for it.
Ginter says, “80% is a desired goal for branch staff utilization, because 20% of that time is used for admin work and training.” While CommunityAmerica doesn’t officially hold managers to reaching the 80% goal because it doesn’t want service impacted negatively, incremental improvements in branch performance month-over-month is expected.
Carefully managing how members use delivery channels long-term ensures even more expensive options, like branches, compliment rather than detract from institutional goals.