9 minutes
As part of an evolving hub-and-spoke branch strategy, credit unions are finding resourceful ways to expand into new market areas and serve members. First seen as in-store branches in the 1980s, the micro branch of today has become a way to immerse the consumer with a CU’s brand and provide an intimate setting to foster deeper relationships.
What Can a CU Do in Such a Small Place?
“Everything, but with different methods of delivery and levels of success,” says Paul Seibert, CMC, VP/financial design at CUES Supplier member EHS Design, a NELSON Company, Seattle.
For example, small in-store branches are often looked upon as transaction locations, not a place to edify brand or build relationships. They can and need to be more, stresses Seibert. In-store branches can become extremely productive by adding personal teller machines with concierge staff trained as high-value service providers.
“Market expansion is top of mind for most CEOs who go small,” says Seibert. “But why not let it be a catalyst for positive change?” Going smaller encourages management to review product and service delivery from a different perspective. It also enables a CU to vet new technologies or market areas, to reach urban and rural areas, even introduce the consumer to a CU’s brand.
John Mathes, director of brand strategy for CUES Supplier member Weber Marketing Group, Seattle, explains that micro branches are a relatively inexpensive way to expand the retail footprint. “They’re perfect for campus locations. They’re also an excellent way to test market presence without investing in expensive brick and mortar.”
Keeping Pace With Niche Providers
Technology has also allowed niche service providers to become formidable competitors without the investment in infrastructure. “These providers include ING Direct, called Tangerine in Canada and rebranded to Voya Financial in the U.S. And others, like, Ally Bank, Bluebird, Mango and PC Financial,” says Morris Smysnuik, CEO for $662 million/18,000-member TCU Financial Group, Saskatoon, Saskatchewan. “As people become more comfortable using technology and different service delivery channels, traditional financial institutions will need to adapt quickly to drive efficiencies.”
In conjunction with EHS, TCU opened its first micro branch in Saskatoon in November 2014 as part of a 144,000-square-foot land development project. The project includes a 59,000-square-foot Sobey’s Grocery Store (the largest grocery chain in Western Canada), plus a number of other retailers, such as restaurants and medical offices. TCU has a standalone building of approximately 4,600 square feet, housing its micro branch (1,900 square feet) and its wealth management company (2,700 square feet).
Smysnuik adds: “In the first three weeks of operation, we opened 31 member accounts. More importantly, each and every one of these members was impressed with the new service delivery model and had indicated that their experience was positive and exceptionally good. In other words, there was a high level of acceptance to this new service delivery model by new members.
“We’re not so focused on the size or footprint of the facility as we are about what kind of services are being delivered at the location,” explains Smysnuik. “We’re also careful not to promote the micro branch as something less than a traditional branch environment. Our micro branch is full service, but with a uniquely different service delivery model than a traditional branch.”
He also envisions a day where there won’t be front-line staff in branches. PTMs will handle all teller transactions, and centrally located account managers will interact with members through video-conferencing. “It’s unlikely we will open another traditional branch in the future. The capital cost and operating expenses are just too high,” concludes Smysnuik.
Bringing the Branch Closer
“The farther away the CU is from a member, the fewer services the member uses,” notes Dave Throndson, VP/business development for CUES Supplier member La Macchia Group, Milwaukee. Micro branches help with market in-fill and tapping into new markets.
Throndson says that an upfront institutional analysis should come first. “Part of our job is to provide this analysis to see if a micro branch is the correct strategy. Ideally, the branch should act as a convenience point so the credit union can capture a greater share of wallet.”
He adds that well-planned, well-placed micro branches offer many advantages. “If the branch portrays the heart of your brand, you’ll get a boost in energy from staff and members, a boost to your image, and become even more member-centric,” says Throndson.
In such a small space, how do CUs serve employee needs related to breaks and compliance with the law? “If you’re part of a larger complex, employees will have access to the requirements, like restrooms or quiet rooms,” explains Throndson. Square footage will dictate needs as well. But, any reputable design firm should be well-versed in code and employment law requirements.
Being Onsite
Bob Saunders EVP/partner at Momentum, a design-build firm based in Seattle, agrees that micro branches have undeniably morphed from old-school transaction facilities to full-service locations. They’re convenient, fill a niche, and can assist in growing a CU’s membership and community bond.
On Louisiana State University’s campus in Baton Rouge, for example, the $524 million/41,000-member Campus Federal Credit Union micro branch is integrated into the student union. “We designed the look and feel to be consistent with the design of the existing overall space. The branch offers an ATM, video capabilities, private consulting areas and extended hours,” says Saunders.
Saunders shares another client story about how $559 million/41,380-member NIH Federal Credit Union, Rockville, Md., uses micro branches to serve medical staff and researchers in hospitals and research and development centers.
“For NIH, it was important to develop just enough area within each space for problem resolution and relationship enhancement,” explains Saunders. “We wanted the member to feel comfortable and catered to, and have the branch feel like an ‘oasis from the workplace.’” In a hospital setting, NIH FCU created a warm, welcoming environment for members to sit down and relax, and discuss their issues and personal needs.
Part of the Neighborhood
For $240 million/48,000-member St. Louis Community Credit Union, micro branches aren’t meant to amaze, but to fulfill the needs of the underserved. They’ve enabled the CU to reach lower-income neighborhoods that otherwise would fall victim to high-cost payday lenders or check cashing outlets.
The CU is the largest Community Development Financial Institution in the greater St. Louis area, with 11 branches, three of which are micro and positioned within social service agencies. “Micro branches help us to meet our goals as a CDFI,” says CEO Patrick Adams. “We’re able to educate and give members access to mainstream financial services at a lower cost.”
The CU’s three micro branches are 400, 600, and 800 square feet, representing about 5,000 monthly transactions, $3 million in loans and staffing of five full-time equivalents for all three locations. More powerful is the fact that 77 percent of branch staff (at all 11 of the CU’s offices) live in the communities they serve. “They understand precisely the concerns of the population,” says Adams.
Security is a prime consideration for any branch but particularly within social services entities. The CU has created a multiple check-in environment, first through a secure reception desk, and by implementing teller cash recyclers. TCRs are safer because cash is entered directly into the machine (and then serves as a “vault”) with no cash handled by staff. “Traditional teller drawers have cash visible and are easily accessible,” adds Adams.
Perhaps the greatest benefit is the gift of social capital the CU receives from the community. “As a CDFI, our purpose is to give back, and the consumer advocacy we receive is huge. We’re bringing to market exactly what the market needs, and that is the goal for every micro branch.”
Micro Means Retail-Centric
“I fell in love with the micro branch concept while working for America First Credit Union,” says Mac Erickson, now senior consultant at CUES Supplier member Financial Supermarkets, Inc., Cornelia, Ga. “The branches were a benefit to both members and internal operations.”
He says that with the exception of a drive-through or safe-deposit boxes, there should be no deviation in the services you offer. “The allure of a micro branch is that you CAN do everything larger branches can. [In-store branches] offer mass exposure and become a living, breathing billboard, reinforcing your brand while capitalizing on a captive audience.”
FSI’s core competency is in its “meet and greet” approach for shoppers and potential members. “Part of our role is to ensure staff and management are on the same page on the intent and strategy of the branch,” continues Erickson. “It’s not just about constructing the office, but supporting the aisle strategy to increase sales and membership. With the micro branch, you have a fresh stage every day to market your products with a proactive sales approach,” he says.
Quality Member Time
In 2013, $187 million/22,000-member CorePlus Federal Credit Union, Norwich, Conn., instituted the FSI in-store branch concept in two Walmart Supercenters. FSI handled the contracting and planning and assisted with the floor plan and open design.
“The branches have been extremely successful in reaching members living in rural areas of the state and drive times significantly reduced,” says Director/Branch Operations and Compliance Ray Hasson, NCCO.
He’s also pleased with branch efficiency. “Staff is cross-trained, creating a level of synergy you don’t find in a traditional branch environment. It emphasizes the member experience, not the transaction.” As a result, CorePlus FCU is incorporating this micro branch philosophy—the focus on a quality member experience—into all its branch locations.
Get Closer to Your Member
John Smith, CEO for DBSI, a design-build firm based in Chandler, Ariz., says micro branches can work for any credit union. “They offer flexibility and savings the big branches of yesterday can’t. And for some, those big branches have become the proverbial albatross limiting what a credit union can do.”
Micro branches are not only less costly to build and market but, when strategically planned, can increase member satisfaction and intimacy. “Even in much smaller spaces, a credit union can still offer the full member experience. It just makes you more strategic in how you create the member journey, technology placement, and how you support with virtual expertise,” states Smith. Technology becomes true enabling tools. “It needs to be seamless, aligned to the strategy, and staff need to have the necessary training in how they assimilate the member to the technology.”
Challenges Faced
The micro branch, with everything that makes it flexible, can also make it challenging. “For one, with less space, you have less room for error,” continues Smith. “Essentially, you don’t have the same curb appeal to ensure you stand out or a building selling your brand, 24/7.” Security can be another consideration; with a campus or retail setting, you may contend with differing waves of traffic at different times.
But paramount to branch success is ensuring you have the right people in place. Smith emphasizes: “You need to hire people who can deliver an amazing experience, who want to make a member’s life easier, and allow technology to handle the transactions.”
With 25 years of marketing and communications experience, Stephanie Schwenn Sebring established and managed the marketing departments for three CUs. As owner of Fab Prose & Professional Writing, her new focus is on assisting CUs and industry suppliers with their communications needs.
