Most credit unions would say that a key operational imperative is reducing the cost created by complexity. Everyone must shoulder the cost associated with the regulatory and compliance aspects that come with running a financial institution. To deliver more value to members, credit unions must look for other areas where savings can be gained by increasing effectiveness and efficiency.
A focus on modernizing with digital offerings is not enough; credit unions must simultaneously make strategic decisions about their physical footprint.
Branch redesign efforts attest to members still having close relationships with the people in their local branch. And, people (even millennials) still need cash. The ATM has been a big part of this ongoing process to provide a convenient, frictionless and intuitive experience – that's also cost effective – regardless of what members need to do. Celebrating their 50th anniversary this year, ATMs have been evolving into a digital/self-service channel that can accommodate consumer demands previously requiring branch visits. However, another emerging trend running counter to this modernization is the ATM network being seen as a loss leader – something that must be provided, but is a commodity on which the organization can make little or no money. Such institutions are selling off their entire fleet of ATMs and replacing them with interactive teller machines (ITMs).
ITMs have been hailed by some as the industry's most transformative technology. They go beyond the most robust ATM functionality and connect members to a live teller or member service representative via remote video. Their potential is vast enough to automate processes across the branch and expand available distribution channels for members. They work standalone as an ATM replacement, can be put in a number of micro-branch scenarios like stores or lobbies, and also augment any existing branch environment.
They can perform the simplest of transactions like dispensing cash and making deposits, or engage members in deeper, more personal interactions to open and fund new accounts, make loan and bill payments, order replacement cards or make transfers across any type of account. What's more, ITMs can be a cost saver for channel budgets, allowing credit unions to address more pressing branch challenges including unused physical space, segmenting the roles of branch staff and digitizing the branch without losing important member touchpoints.
Financial institutions have heard for years that they should take note from retail giants. Well, this is what's happening today in retail. Brands are forging a new middle ground where big box stores continue to shrink their physical footprints and online-only brands are craving some of that physical space, placing pop-up stores or micro-type concepts in targeted locations. Fashion retailer Nordstrom recently announced it will open its first micro-store. The footprint is a fraction of the full department store's typical size and will focus more on services – style advice, tailoring, etc. – rather than stocked items like clothing.
Similarly, ITMs are a digital middle ground for credit unions – a physical solution that offers access to a member service representative who can be available practically wherever and whenever membership demography indicates. This transition to ITMs should sharply influence the branch strategies of credit unions moving forward. Not only will the more advanced technology in these machines be better suited for serving a population that is increasingly digitally savvy, but they also provide an excellent platform for introducing a number of additional service options, such as the branch environment "retail-ization" and concierge banking concept. Credit unions would be remiss to think that the answer to their channel strategy lies within either the branch or digital solutions alone. Understanding how to create hybrids within each of these areas is the key to creating a real advantage.
Russ Bourne is Executive Vice President at SRM. He can be contacted at 901-681-0204 or [email protected].
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