How important are physical branches to the future of your credit union’s delivery channel strategy? Let’s look at the facts:
- According to the Hitachi Consulting Group (Key Trends in Retail Banking on Payments, 2006), large banks are opening new branches with a rate of expansion significantly exceeding population growth. The number of branches in the U.S. has grown 1.5% annually over the past five years, and the largest networks opened as many as 1,324 de novo offices in 2006.
- A recent survey conducted by the American Bankers Association and the TowerGroup found that 92% of consumers use a branch at least once a month. Among users that conduct at least 75% of their business online, over 70% visited a branch the previous month.
- A study of non-credit union consumers conducted by Credit Union Executive Society found that 68% of those surveyed chose a bank over a credit union because it was more convenient.
- The ABA Banking Journal found in a recent study that 62% of participants chose convenience over rates in the selection of a financial institution.
There is no disputing it: credit unions must incorporate branches into their delivery approach to satisfy their members’ desire for physical locations and to stay abreast of the competition. So where do credit unions stand? Have they been able to meet this need?
Branch growth over the last several years has been relatively slow among credit unions. Currently, there are just under 18,600 branches for 8,500 organizations, up from 17,500 four years ago, but much of this limited growth is focused in a small percentage of credit unions. Individual credit unions remain small, with 69% consisting of only one branch and 97% having fewer then 10.
Overcoming the Obstacles
The need for numerous locations poses a problem for countless organizations. Many small networks are unable to support membership desires for an array of reasons, ranging from the exorbitant cost of building even one branch to difficulty determining where to build branches due to wide geographic disbursement of members. And don’t be fooled-other institutions are taking advantage of the opportunity to lure customers away with availability that some credit unions just can’t offer.
Shared branching gives credit unions a way to overcome the increasing competition from big banks and other new market entrants and provide their members with thousands of nationwide locations-all without spending a penny on proprietary brick and mortar. Through this branching strategy, credit unions cooperate with each other to enhance the member service experience by offering numerous convenient locations close to their members’ home, work or travel destinations.
With 2,525 locations, a number that increases every day, shared branching ranks sixth in the nation in terms of branches after top financial institutions such as Bank of America and Wachovia. Nearly 1,350 credit unions have already realized the benefits of offering this invaluable service, and the potential to out scale top competitors is great as more and more organizations join the network.
Credit Union Service Corporation (CUSC) is the leading shared branching organization providing services to 800 credit union participants and 1,400 locations nationwide. CUSC’s credit union designed switching technology, the Next Generation Network, has become the most widely used switch for shared branching transactions, providing services to over 700 credit unions (representing 88% of those participating in shared branching through CUSC and 51% of national participants), due to its fraud resistant features, enhanced functionality, flexibility in the credit union environment, and lower costs. NGN now processes in excess of 50 million transactions per year.