Battle Of The Branches: A Change In Location

Alternative branching strategies can help carve out a foothold in the community, but embracing space is key to ongoing development.


With 45 branches, including three on Boeing facilities, BECU ($10.5B, Seattle, WA) has developed a substantial physical footprint in the western Washington region.

“Our branching strategy is about establishing ourselves in the marketplace, having enough capacity, brand recognition, and volume of membership to build up that activity, and then moving it out and continuing to grow,” says Stacie Wyss-Schoenborn, vice president of member solutions.

A Shift In Strategy

In 2010, BECU had 10 branches, including two financial centers and eight grocery store locations. The 2004 failure of some Safeway Select Bank branches opened up opportunity for expansion into 24 in-store locations in just 14 months.

The benefits of these in-stores were numerous for BECU, including lower barriers of entry into new markets and minimal operating expense. “You could never roll out 14 branches in 24 months if you were dealing with any stand-alone model, says Wyss-Schoenborn.

Despite two years of success with in-store model, BECU is now shifting its new branch spend. The credit union is currently relocating existing in-stores to stand-alones and building new brick-and-mortar locations, citing double digit growth in branch activities as the cause.

“We’re constantly evolving and constantly throwing more analytics at our branch strategy,” Wyss-Schoenborn says. In its branch history, the credit union has opened a total of 64 locations and closed or relocated 20, including 19 in-store branches.

“Right now, we’re trying to concentrate on where we are going to acquire business and what — from a channel optimization perspective — is the best point of contact for branches to be successful.”

Growing Up In-Store

Typical BECU in-store designs ranged from 385 square feet to 1,200 square feet at the largest and typically contained two ATMs, two online kiosks, an express drop box for after-hour deposits, three member consultants, and a manager. This left the branch with no space for training and only a small equipment closet for employees to take lunch or relax on their break. Employees also shared bathroom facilities with the rest of the store.

Traffic and privacy were also problematic for the in-stores, as lines sometimes haphazardly spilled out into the grocery aisles during rush hour.

“It’s hard for staff to provide exceptional experiences when they’re being traffic cops separating out ATM lines from the members seeking more in-depth services,” says Wyss-Schoenborn. “We couldn’t control that branch experience as well as we wanted to, and it had a member impact.”

Roughly 4.15% of negative Net Promoter Score comments about location belonged to BECU’s in-store branches, versus just 1.83% for stand alone branches.

“In-stores work, and there’s a ton of benefits to them,” Wyss-Schoenborn says. “Credit unions just need to know why they’re going in there and know the criteria that might make them leave that model later on.”

Streamlined Transactions

Aside from two Neighborhood Financial Center branches, which follow the traditional operational model of teller lines and member service representatives, all of BECU’s remaining in-stores and its new stand-alone branches follow a tellerless branch strategy.

“There are only six things that members can’t do in a neighborhood financial center that would require the assistance of a teller, including returning an AMEX check, dealing with bonds, handling coins, and a few others,” Wyss-Schoenborn says. “If you need cash, it comes out of an ATM.”

The tellerless model creates additional operating benefits but does require changing how the members think about the role of branch employees.

“It’s never an answer of ‘no, we don’t do that,’” Wyss-Schoenborn says. “We just reframe it and say, ‘Your expectations of how that may be done might be a little bit different but I’m going to walk you through it, educate you, and you’ll be able to do it on your own in the future.’”

The model also lets staff concentrate on the sales and service experience.

“The first goal for reps is to attract new membership and the second is to deepen those relationships,” Wyss-Schoenborn says. “We’re also able to hire people who technically don’t have cash handling experience but have other skills we want.”

Embracing The Change

Both members and employees are fans of the stand-alone branches built so far. In addition to break rooms and waiting space in the lobbies, other new features such as conference rooms allow the credit union to bring out mortgage, small business, or wealth management specialists to communities to advise members.

“We’ve gotten smarter in making sure we have scalability and retain some space in these locations to add desks or an ATM as the branch grows,” Wyss-Schoenborn says.

Since beginning the shift from in-store to retail, BECU has reported more than a 30% lift in new members, loan applications, deposits, and loan accounts.

Looking Forward

A cross-function team representing IT, facilities, treasury, products, and virtual banking is responsible for assessing the potential of each new or relocated branch.

“We had been doing a lot of analytics ourselves, eyeballing things and doing the best we could with the data we had available,” says Wyss-Schoenborn.

In 2010, the credit union began to overlay its own research with sophisticated mapping software from Pitney Bowes.

“We use that data to plot the impact ratio of ourselves against other competitors in the area, based on branch count and a deposit perspective,” Wyss-Schoenborn says. “We can also age branches to see what kind of pull a location might have in a geographic area five years out.”

In any case, BECU also focuses on maintaining an eight-minute drive-time perimeter from members’ homes.

“We make sure that if we relocate your branch or open a new one it’s within eight minutes from you,” Wyss-Schoenborn says. “That’s the optimal time members would travel to do business with us.”  

If the location meets requirements, BECU does a first level review and creates financial projections for location expectations. In the end, despite data insights and analytics, the final decision is based on the team’s gut instinct.

“Those systems don’t know how good branch visibility is or whether there’s something like a major freeway dividing the work-home flow that would impede access,” Wyss-Schoenborn says.

As it turns out, the Pitney Bowes software revealed that the credit union had already been placing branches with an 88% efficiency ratio prior to using the service.

“Additional data is always great, but if you don’t have access to these types of advanced services, you can still be successful,” says Wyss-Schoenborn. “You just have to make sure you’re doing your due diligence, thoroughly researching your areas, and sticking to your criteria.”