Making a Success out of Branching

Ed Callahan and Bucky Sebastian explore effective branching strategies and reevaluate the fundamental concept of a branch.


In the banking industry, branching is hot. This is especially true concerning prime locations. Companies are bidding up the values of good locations under the theory that all their costs will be more than recouped by significant new business.

Among credit unions, theories on branching reach to two extremes. One holds that it’s best to place as many brick-and-mortar branches as possible, bringing in traffic. The other extreme foregoes brick-and-mortar in hopes that a headquarters office and the Internet will sustain growth.

Both theories have difficulties. The problem with the first is that brick-and-mortar branches are expensive. The problem with the second is that a single headquarters and the Internet are likely only to sustain a current level of business and not grow it.

Branches are always going to be important, because members want convenience, and branches have traditionally been the core of convenience. This is no more true than when a credit union expands into new territory – a branch is a powerful symbol of presence. The trick for credit union managers is going to be making the most of what a branch has to offer while keeping its costs in trim. Let’s look at some branching issues.

Making the Most of a Brick-and-Mortar Branch

Brick-and-mortar branches are expensive, but there are ways of keeping costs under control. One is to make auxiliaries shoulder some of the burden. These might be investment advisors, insurance representatives, title insurance companies and the like. They should pay for their space. Whether you agree with this view or not, the members who use a branch have to understand that either in the short or the long run they pay a price for it. Members should know how they are paying for the privilege of walking in and doing their business with credit union employees.

Another way to hold costs in line is to trim hours of operation. The most expensive means of operation is keeping common hours for all branches. This is convenient for the members who can’t remember which branch keeps which hours, but such members are rather few and they simply need to remember. Additionally, you can’t have a branch open at seven in the morning just because five people like to stop in on their way to work – it takes too many employee-hours to satisfy them. Nor can employee contentment be the sole driver of when a branch is open. You have to be open during hours that give the most convenience to the most members at a particular branch. You can’t afford to have employees staring across the counter at an empty room.

The third way to hold down costs is by using shared branching. We’ve advocated this for a long time. Shared branching not only means shared costs. A shared branch is also a networked branch and a symbol of credit union philosophy. It is not so much a presence of several credit unions as it is a demonstration that credit unions reach out to people, work cooperatively and are spreading convenience to credit union people around the globe. No bank or group of banks can make such claims.

What is a Branch?

We might do well not to think of a branch in traditional terms, that is, as a brick-and-mortar location. By some people’s reckoning, an ATM is a branch. Indeed, new ATMs are able to display a deposit check on their screens, a confidence booster that should lead to increased use for making deposits. To persons who are computer adept, their laptops are branches. Already some members are making transfers, paying bills, checking balances, adding to stored-value cards and more with their computers. And they can do this from the beach.

We should also acknowledge that the concept of a branch is evolving. One credit union is not even using the word “branch” anymore, but rather “advice center.”

We managers are guilty of thinking about branches from a management point of view. We need to discover what members think a branch is, or what they think a branch should be and how it should deliver its services. A member will always want convenience and will always want rate, but whether he or she gets it by walking or driving into a branch is probably not particularly important to that person. If the convenience and rate can be gotten another way, then the member will more than likely be willing to go that way.

Mark of Success

Probably the credit unions that succeed will be those that place branches neither everywhere nor nowhere. Rather it will be the credit unions that understand their members, place branches efficiently and make the most of what brick-and-mortar they have. Anyone can boost business by building five branches somewhere. It will be the credit unions placing limited branches in a new market and capturing this market with the resources at hand that will be the real winner – for itself and its members.

More information on branching is available in the report Branching: A Brave New Brick-and-Mortar World.




May 30, 2005


  • Agree with the comments on shared branching. Not sure about the laisse faire approach on member's wants not being important. Oh well, Bucky and Ed are always interesting.