By Dr. Kathy Snider, Senior Vice President, Engage Products, Co-op Solutions
Through the first half of 2022, U.S. credit unions opened 12 net new branches, adding to the net 46 branches opened in 2021. Meanwhile, U.S. banks closed 2,927 branches in 2021, a trend of divestment that has continued through 2022.
What explains this stark difference between the approaches that credit unions and banks take to their branch strategy?
And just as importantly, what is the future of the branch for credit unions and their members?
Why are banks closing branches?
It’s easy to understand why banks are downsizing their branch networks. As publicly traded, for-profit corporations, banks are motivated by the bottom line, and are under constant pressure to reward their shareholders. Branches are expensive to operate, and with foot traffic declining as the popularity of digital and mobile banking grows, there is no longer incentive to offer in-person services for routine transactions like check deposits, cash withdrawals and transfers that can be performed just as easily and less expensively online or at an ATM.
This has led many banks, including JPMorgan Chase, Wells Fargo and U.S. Bank to shutter hundreds of branches over the past two years. Even mid-sized regionals have joined the trend, with Huntington Bank closing 221 branches in 2021, representing 16% of its Ohio-based network.
Credit unions, on the other hand are focused on offering their member-owners the best possible experience. They recognize that people still value personal interactions, particularly for more complex transactions where expert guidance and financial advice come into play.
That’s why credit unions are not divesting of their branch networks to the same degree as their bank competitors. But it is well understood that the purpose of the branch is changing, from one centered around basic teller line transactions to a focus on building and deepening relationships. Along with this change in purpose the look, feel and functionality of the branch also needs to evolve.
What does the branch of the future look like?
For credit unions to fully commit to the new member-centricity, it’s going to take an “all-in” approach. Within the branch context, this will likely be a mix of machine- and human-based interactions.
Whereas the teller line may continue to exist in some form, the future lies in virtual banking. Two-way video-enabled ATMs are a combination of interactive touch screens, traditional ATM functionality and video technology, and offer a vivid, near-in-person experience for members and staff. Critically, video ATMs offer significantly reduced operating costs and greater efficiency than a traditional in-person teller line.
Buoyed by the growing acceptance of remote banking in the post-COVID age, major ATM manufacturers like NCR and Diebold have made significant investments in video remote teller technology in recent years, improving reliability and creating an overall better experience.
That’s why Co-op is excited about the development of an upgraded solution for integrating shared branching capabilities at the ATM that is easier to operate and support. It will provide members with intuitive, self-service access to both account-based and card-based transactions at the ATM and kiosks, without the need for an in-branch teller.
But video-enabled ATMs aren’t the only exciting trend happening with branch design and capabilities. A movement toward smaller facility footprints, staffed with fewer employees will help make branches more efficient, allowing credit unions to focus on engaging in more meaningful interactions with their members. Enabling members to use self-service kiosks and digital apps for simple transactions they are comfortable doing on their own will leave more room for credit union experts to engage in meaningful, one-on-one consultations with members to help drive membership growth and long-term relationships.
Shared branching serves a role
The evolving nature of the branch reinforces the importance of shared branching as a hallmark of the credit union philosophy of “people helping people.”
With 5,480 branches coast to coast, the Co-op Shared Branch network is second only to Bank of America in terms of number of branches. The Co-op Shared Branch network allows members of one credit union to perform a range of transactions at another credit union. Through the Co-op Shared Branch network, participating credit unions can serve members in diverse geographical locations, even when they move or travel.
Moreover, shared branches allow members outside of a credit union’s home service area to have access to the same outstanding service they would receive at their credit union’s owned branches. Moreover, shared branching demonstrates how cooperation drives efficiency, allowing individual credit unions to expand access to out-of-area members, as well as those living in remote and rural geographies.
Shared branches also allow credit unions to grow their membership, by extending needed services to the next generation. For example, a credit union client recently shared how a member’s son was away at college when his car broke down. The parents were able to transfer funds to a local credit union that participates in the Co-op Shared Branch network, allowing their son to withdraw the funds needed for the repair. Without shared branching, it would have been much more difficult for the student to access the funds he needed, quickly.
In our commitment to supporting the evolving shared branching model, which is seeing an increase in account takeover fraud, Co-op is excited to announce the introduction of IDCheck by Co-op (coming in 2023), an integrated identity and authentication solution that allows credit unions to combat fraud more thoroughly within the member journey. IDCheck will enable Co-op Shared Branch credit unions to authenticate Co-op Shared Branch members via a QR code and one-time passcode multi-factor authentication. By adding this new solution, participating credit unions can help protect their members’ identity everywhere they go.
The credit union branch’s purpose is evolving
The branch of the future is all about giving members choice in how they interact with their credit union. Each individual prefers different channels of engagement, based on their unique lifestyle needs and personal preferences. Some choose to conduct all interactions remotely and through digital channels, while others prefer to engage face to face.
As credit unions evaluate their branch strategy, it’s important to analyze cost vs. efficiency, using the ROI model. The deployment of kiosks, multi-function ATMs, and digital apps to handle most routine transactions frees up staff to focus on providing expert advice and consultation within the in-person experience, helping to engage members more comprehensively and establishing strong, loyal relationships for the future.
Across today’s digital-first, immediate gratification financial services landscape, branches still have an important role to play. That purpose is evolving, but credit unions are well-positioned to leverage their branch networks to help build relationships while meeting their members’ needs—now and in the future.