Dead Branches?

As the digital channel moves to supplant the personal one in consumer financial services, credit unions are striving both to serve today’s members and prepare for the future by blending tech into their branch brands.

Brett King, noted author, speaker and fintech entrepreneur, is predicting the crumbling of the foundation on which CUs are built—the warm, friendly branch.

“The credit union movement is predicated on differentiation through branch interaction based on excellent personal service,” he says. “When people no longer come to a branch for service, that differentiation is lost.”

The hard fact is that branches are becoming obsolete, King insists. Various research reports show that mobile banking is becoming increasingly popular and the number of branches is declining. In 10 years, just 30 percent of the branches that existed in 2000 will remain, King predicts.

Many CUs are investing heavily in save-the-branch strategies that are doomed to fail, he adds. “Planners adopt the Apple Store thesis: Tech-savvy consumers like to come into Apple Stores, so if we make our branches like Apple Stores, they’ll come. But they won’t. They’re not coming to branches because they don’t need to. They’ve changed their behavior, and you can’t overcome a behavior change with a new branch design. The only way to keep them coming to the branch is to remove the digital option, and that will never happen.”

Branding with Technology

Some CU leaders with skin in the game see it differently. A technologically advanced branch can be a potent brand-builder, insists Brian Nesgoda, chief information officer and SVP/risk management at $750 million Sikorsky Credit Union, Stratford, Conn. “Our stated brand promise is to be ‘easy, simple and consistent.’ We’re near the end of a big project to streamline the experience of a member who comes to one of our branches”—and the experience of a member who doesn’t come in. “We’re about to roll out online account opening,” he reports. “We’re pushing as much functionality as we can to members’ mobile devices.”

Nesgoda doesn't think branches will completely disappear. “There will always be a role for the physical branch. We want to be efficient and convenient for our members, but we don’t want to lose personal contact and relationship-building. It’s critical to be their trusted advisor. You can build trust through phone conversations and live online chats, but meeting face to face will always be a special opportunity.”

Given the ease with which documents can be shared and signed digitally and the ability to hold video ‘face-to-face’ consultations, Nesgoda can’t think of a single financial service that couldn’t be done digitally in time. But he also thinks there are people who can’t be successfully moved to the digital channel 100 percent of the time. “People are still social creatures,” he observes. And it’s good to be able to fall back on a branch if digital self-serve systems don’t work for any reason, he adds.

Nesgoda likes the idea of using technology to recognize a member when he or she walks through the door of a branch. “It’s important to know who just walked in, to immediately call up the member’s data from the CRM and to greet him or her appropriately. We can’t do that yet, but it’s our goal.”

Branch Survival Strategy

$290 million Tampa Bay Federal Credit Union is taking steps to create technology-enhanced branches members will want to use. Last year, the CU installed Omnix Lobby Tracker from FMSI, Alpharetta, Ga., reports Maggie Robarts, AVP/sales and service. The tracker records live activity in the CU’s five branches and generates reports that quantify traffic and can highlight efficiencies and inefficiencies, she says. “We were able to identify at least one process that should be moved to a back office function, so our front line could focus on sales and service for our members.”

She hopes to reach the point where the software will aid staffing and scheduling. “The product offers this capability by reviewing reports to determine busier days/times, and it also lets me review the stats by branch to see if we are staffed adequately.”

“Some of our branches today operate without a receptionist,” she explains. “A member enters and signs in on an iPad mounted on a stand near the door. The member’s name and reason for the visit pop up on the screen of an employee, who comes to help the member.”

The software tracks which staff members are present and offers members the opportunity to meet with those specific people.

The software also expands a manager’s reach. “Carri Alvarez is the manager of three branches,” Robarts notes. “She can log in remotely and see the traffic in all three branches in real time.”

The CU also has contracted with DocuSign, Seattle, so that loan documents can be signed digitally. And it has introduced MeridianLink, Costa Mesa, Calif., for online account opening, according to Robarts. The future could involve introducing interactive teller machines that would function as an ATM/cash recycler combo, Robarts says.

“It would expand self-serve options. There would be a screen. A member who needs help could hit a button and have a real-time conversation with someone they could see in our contact center.”

The current two-channel strategy—digital and physical—is looking stable and permanent to Tampa Bay FCU’s leaders.

“We expected the digital channel to grow and the physical channel to shrink,” Robarts observes, “but that’s not happening. The online channel is getting more robust all the time, and activity is growing, but we haven’t seen a drop-off in foot traffic in the branches or phone calls to our contact center. We’ve given members a choice, and they’re picking both. The same members who do things online still come to the branches.”

Staff size in the branches has stayed about the same, but job descriptions and skill sets have changed, Robarts reports. “We’re looking for people with social skills and an affinity for sales, people who will engage members in conversation and explore possibilities. The people we hire for our branches and contact center look a lot like the people we hire for our front-line sales effort,” she explains. “The most valuable employee now is the universal representative—the resourceful person who can do almost everything.”

Tampa Bay FCU closed two branches during the great recession, Robarts says. “Our geographic footprint is fairly compact, so members could still get to a reasonably close brick-and-mortar location.” But now the CU is building its sixth branch as an economical “storefront” operation. “Our target demographic is low- to moderate-income members, so we want to build the branch where they’ll come. We’re happy now to start with a storefront to build traffic. We can expand it later to a full-fledged branch if the usage justifies it.”

Digital Differentiation

King shakes his head about such efforts. He is convinced that attempts to differentiate through members’ branch experience are doomed to fail. “Research shows that the member experience that counts now occurs more often in the digital channel than the branch channel,” he reports. “The relationship with the member is migrating to a relationship with the member’s mobile device.” Quartz reported way back in 2015 that more people used their phones than visited a branch to do their “weekly banking”.

King says a CU needs a different mindset to differentiate itself in the digital channel.

“Huge databases that feed analysis and tracking engines make it possible to know your member in ways that were impossible before,” he points out. “If you can see what’s happening in a member’s personal life, you can step up with the right service at the right time.” His example: You track the member as she walks into her grocery store. You know she usually spends over $200 on these visits, her checking balance is $140, and her automatic payroll deposit won’t post until that night. So you alert her to the potential shortfall and offer a small loan or one-time overdraft protection or advise her to use a credit card.

That kind of a situation is what King calls differentiation. But some industry leaders say such tracking is just creepy. And while the debate goes on, the stakes get higher.

One vote for “creepy” comes from Paul Seibert, CMC, a Seattle-based consultant  specializing in CU branch issues. Trading on intimate details gleaned from databases could backfire, he cautions. “Most people we talk to don’t want their profile flashed in front of the whole branch staff,” he says.

“CUs need to be careful when substituting high-tech convenience for brand engagement,” Seibert adds. “Almost every financial interaction can now be done remotely, from anywhere at any time, using generic technology. But people still want to talk face to face with another person about their money and how financial decisions will affect their future,” he insists. “A purely technical interface will only suit a small number of members.”

Fighting Friction

While the future of branches is hotly debated, everyone, including Ted Bilke, wants to eliminate friction. He recently needed to have a document notarized, so he made that rare trip to a branch of his billion-dollar CU and discovered that he was fifth in line. So he waited. “That’s the way it’s always been, but it’s not the most efficient way,” he observes.

In addition to being a CU member, Bilke is president of Symitar®, San Diego, the division of Jack Henry & Associates behind the Episys® core platform. And Bilke has a solution to that waiting problem: a Symitar feature introduced earlier this year called Appointment 365, a member-generated, web-based appointment scheduling tool.

“If a CU offers it, a member, through a single sign-on, can click on a button on their desktop, mobile or tablet-based banking app and set up an appointment to see the right person at the right branch at the specified time,” he explains. “It’s kind of like Starbucks, where you preorder and prepay and just grab your order and leave when you walk in.”

Historically, members calling ahead to make appointments in branches was a low-volume activity, but as CUs shrink the size of onsite staffs and expand their wealth management and business services, and as more users keep their schedules in their smartphones, high-tech scheduling tools have become more popular.

A product called Radius  is now available in the healthcare industry for scheduling off-site appointments for increasingly mobile nurses that go to patients rather than expecting members to come to them. Jack Henry doesn’t offer a parallel service yet, but Bilke considers it “a logical extension of what we’re doing.”

Branch software like Appointment 365 and Omnix Lobby Tracker can schedule appointments, sometimes from smartphones or laptops, track the amount of time spent in the meeting and report results or identify the next step, Seibert explains. At the top end, they can schedule a conference room, display a digital greeting when the member arrives and show the name of the staff member and the service under consideration. It can even provide the required notification about an employee’s status (i.e., not a credit union employee) when a member signs in for investment services.

Bilke thinks that technology can actually support warm, personal greetings that build relationships. As CUs grow, branch staffs shrink and member visits become less routine, it’s less likely that a teller will recognize a member’s face. Rather than ask the member to fish ID out of his or her wallet, CUs are reaching for systematic recognition. That can mean swiping a card on entry. Or it can

be biometric, with a thumb or hand print. Or, increasingly, it can be by the smartphone the member is carrying in a pocket or purse, he notes.

“I think we’ll see more near-field communication in branches,” he predicts. “Phone proximity may be the next evolution. A reader in an ATM, lobby kiosk or posted near a branch door may identify a member instantly by the radio frequency signal coming from their phone. That’s not happening in CUs yet, but it is being discussed.”

As credit unions begin to cultivate a relationship with a member’s mobile device, what can happen relies partly on the credit unions’ technology and partly on the device the member chooses. “If a member uses Amazon Echo, credit unions have the opportunity to offer unique transaction types via digital channels with members that have an Amazon Echo, transactions not available to members without an Echo,” Bilke illustrates.

The fate of credit union branches may ultimately depend on whether financial institutions can turn back the fintech invaders or negotiate a productive peace with them, either through credit union service organizations, tech vendors or processor alliances, and make their offerings available in—or in place of—branches.

A fintech guy, King insists: “You can’t beat the fintechs head to head. They can access and deploy capital more efficiently and build a compelling experience. Their core competency is building digital relationships.” It would be prohibitively expensive for a CU with its high overhead to try to match the technology resources of a fintech. The solution, he says, is to partner with fintechs. Fintechs crave users; CUs crave digital technology. Make a date.

Richard H. Gamble is a freelance writer based in Colorado.