Best Practices: The New Branch Imperative

Have you been trying to figure out what to do with operationally driven legacy branches? Or maybe you find yourself second-guessing the purchase of kiosks for all branches when no ROI analysis was done, and only some soft growth assumptions provided by a vendor were considered?

You are not alone.

With efficiency top of mind and teller transaction volumes continuing to decline, credit unions need to address such challenges now, more than ever. The winners will be those institutions that think outside the box on technology and innovation—and also are numbers-driven, with a focus on continuous improvement.

Innovation is the Secret Sauce

Too often, credit unions think of innovation only in terms of technology. To be truly innovative, initiatives must include the key elements of processes, products and staffing.

$11 billion BECU, Seattle, was an innovator in switching its branches from being operationally driven to truly sales-driven. The goal was to move teller transactions out of staff’s hands, and free them up to talk with members.

To do this, the credit union invested in smart, self-service ATMs, and relies on shared branching to support the rest of the traffic. This makes it possible for branch employees to focus on sales.

At the 2013 BAI Retail Delivery conference in Denver, The Medici Effect author Frans Johannson suggested that people who change the world try more ideas than the average. He cited examples like YouTube, which started out as a dating site, and Nokia, which was the leader in phone hardware until it realized buyers wanted apps, not pretty colors or ringtones.

True innovators understand that failure is an integral part of innovation. According to John Gourville, in an article for Harvard Business Review, 70 percent to 90 percent of new innovations fail. Still, big banks have figured out that the potential for failure should not be a reason to scrap innovation. (Of course, the ability to absorb seven-figure failures doesn’t hurt!)

Consider Bank of America’s Keep the Change® savings program and the early rollout of mobile deposit capture by Chase and Wells Fargo.

Cornerstone Advisors believes investments in innovation should be at least 1 percent to 2 percent of credit unions’ technology budgets, depending on a their membership and competitive pressures from innovators in the market.

Today, innovation is more like .05 percent of the budget—or less—for most credit unions. That means for a $1 billion institution that spends about 35 basis points of assets on technology (according to our benchmarks), the recommended investment should be $35,000-$70,000 a year. That’s not easy to swallow for CUs that are deep in cost-cutting mode, but a number of tactics are available to help fund the cost of innovation:

• Invest in smaller, sprint-like initiatives that are executed quickly and have exit strategies clearly defined and understood by all. For example, spend $20,000 on one concept branch rather than investing $250,000 on all branches. Keep in mind, however, that just because an idea worked in one branch doesn’t necessarily mean it will work in all branches.
• Look at renegotiating contracts from mature and tactical vendors (e.g., core, debit, online banking, bill-pay). There is likely room to cut expenses in at least one of these. Offload some operations functions to slower/rural branches. Top candidates include scanning, member support and onboarding/outbound sales.
• Spend less time/focus listening to traditional banking vendors that may have an agenda that conflicts with your push for innovation. Many credit unions jump into large branch technology investments without challenging assumptions or barriers on staffing, member impact and integration.
• Create a business case for new investments and determine the metrics that will help evaluate the return on investment, e.g., profit/efficiency (teller transactions per teller FTE, new checking accounts per branch), as well as member service metrics (Net Promoter Score). Review the metrics periodically to measure results and trends.

Constant Improvement is But Table Stakes

While innovation is important, getting the basics of branch processes/technology nailed down is even more critical. There are three things every credit union must get right:

• Get rid of the paper. This is easier said than done, of course, but a few areas will help make this a reality. For new accounts, members usually want a copy of their documents on the spot (vs. being emailed via secured messaging). Give members hard copies, but there is no reason to print out a copy for your internal files. All documents need to be electronically signed and automatically indexed into the credit union’s imaging system. Sales/referral tracking and teller logs are also places where paper should be eliminated.
• Embrace workflow. A major stumbling block that feeds inefficient processes is employee errors that can lead to manual quality control, member complaints and employee frustration. Wizards that walk employees through processes that include required fields, embedded e-signature, dropdown menus and address validations are a must in the new world. Many credit unions have these capabilities, but don’t use them because they require internal configuration and mapping.

Symitar, San Diego, via its PowerOn tool; Open Solutions, Glastonbury, Conn., via DNA’s App Store; and D+H, Lake Mary, Fla., via UltraData all provide good capabilities in this area. The trick is leveraging the available capabilities to their fullest.

Point solutions like MeridianLink, Costa Mesa, Calif.; Fiserv, Brookfield, Wis., via WireXchange; and CRIF, Atlanta, via ACTion do a decent job on their particular area of focus, but it stops there.

• Integration is non-negotiable. Nothing is more frustrating to employees than having to log in to multiple applications and re-enter information numerous times. This can mean longer wait times for members and lead to errors.
• For example, a new member probably has an average attention span of 20 minutes when he walks in the door. If the member service representative spends 15 minutes on the computer, only five minutes remain for relationship building. Instead, open the membership/account in five minutes and spend 15 minutes with the member on sales/needs gathering. This can be achieved by integrating data collection efforts and all required forms. This sounds like a no-brainer, but many credit union processes still require duplicate input/paper applications and wet signatures.

While the future is unknown, change is clearly coming in how members interact with credit unions. Now is the time for credit unions to turn branch delivery upside down and focus on sales and efficiency through a combination of innovation and constant improvement.

Eric Weikart is a managing director with Cornerstone Advisors,a CUES Supplier member and strategic provider based in Scottsdale, Ariz.