To Branch or Not-to-Branch?

As credit unions look to increase operational efficiencies and ensure the outstanding member service they are known for, many have opted for implementing new technologies to increasingly digitize member interactions to simplify self-service, and for many, leave the value of branches in question.

In fact, branch closures have inundated the news these past few years; much of this could be related to acquisitions and overlapping coverage. With thousands closing or soon-to-be closed, the combination – self-service, digital technology and increased branch closures – has prompted the question, are branches becoming obsolete? The short answer is no.

Branches Drop Like Flies, Yet Consumers Value Human Interaction

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We've all seen the headlines – America's biggest financial institutions are closing thousands of branches at a rapid rate. In fact, since the financial crisis, more than 10,000 branches have closed – an average of three a day. And in the first half of 2017 alone, a net 869 brick-and-mortar locations shut their doors.

As financial institutions try to cut costs and rely on the rise in self-service and digital banking, branches seem to be dropping like flies, creating the misconception that consumers do not need them or value them. This is simply not true.

Consumers have a strong interest in face-to-face interactions, especially when it comes to their finances. According to a recent report by Accenture, consumers want in-person interactions with their financial institution, with 78% of U.S. consumers expecting to visit their local branch just as much or more frequently in the next five years. This indicates there is no sign of branches becoming obsolete, but perhaps even more necessary. While digital has increased the number of transactions, it has not reduced the consumer's perceived value of the branch. On average, marketing in markets with a branch footprint delivers a 5X response rate compared to non-branch markets.

And this holds true across all generations – even millennials. While this tech-savvy group is most vocal in wanting exceptional digital services, they still value face-to-face interactions and do not view digital as a complete substitution for that. In fact, JD Power found that 76% of 18- and 19-year-old consumers had visited a branch in the past year, which is on par with other generations.

Other Industries Have Figured it Out

Aside from consumers' expectation for physical branch locations and face-to-face interaction, other industries, particularly those with a vast digital presence, are also pointing to a need for branches by opening retail locations.

While online sales continue to increase at retailers across all industries, physical stores aren't going away anytime soon. Look no further than e-commerce giant Amazon, who recently opened its first physical store last year and then followed with the acquisition of Whole Foods. The reason, according to Amazon CFO Brian T. Olsavksy, is that retail stores will provide "another way to reach the customer and test what resonates with them."

Another example of a company that understands the value of brick-and-mortar locations and face-to-face interactions with customers is Apple. Its Genius Bar, a tech support station located inside all but one of Apple's retail stores, provides collaborative, knowledgeable support for customers of Apple products. Apple offers a variety of digital and self-service technologies for support, but its sales and service delivery has significantly valued an in-person interaction as a key asset in their brand-value to customers.

While digital, self-service channels are a must-have in today's mobile-first world, they do not replace the branch or lessen the importance of human interaction.

CUs Must Transform Branches, Not Close Them

Instead of jumping on the branch-closer bandwagon, credit unions must transform the branch to better connect and engage with members. Achieving this requires evaluating five major areas:

Reutilize branch staff. Instead of eliminating positions, it is imperative that credit unions rethink their employees' roles regarding member engagement. How can they gain the financial expertise to develop meaningful relationships rather than simply process transactions? Ideally, branch employees will spend less time conducting routine work and more time guiding members in making decisions. In tandem with this new focus, staff will have more time to sell the products and services members need, creating a much more personalized interaction. Automation should simplify getting things done for members; branch staff should be empowered to adequately interact with, secure loyalty from and sell to members.

Update internal processes and automation. All too often, financial institutions add technology as a solution without identifying or assessing the core issues and processes within the branch that need improvement to deliver outcomes for the member. In order to do just that, credit unions must carefully rethink current business processes. The idea is to foster a better understanding of member needs and to engage with them across channels without friction throughout their banking journeys. Credit unions must make it seamless to leverage human and physical resources with digital technology and automation to make assisted and self-service interactions work together to exceed member expectations.

Focus on strategy and design. Develop a branch strategy that considers growing the efficiency and quality of resources available. When shaping the member experience, credit unions must first realize that transforming a branch is much more than a project to check off a list. It cannot be accomplished by simply developing new and improved technology. It is a long-term commitment that goes beyond digital upgrades.

Facilitate quality in-person interactions. At the highest level, credit unions should transform branches from transactional centers to sales and advisory centers. As members opt to go online for services like check deposits, branches now need to emphasize more value-added services that require face-to-face interaction. Branches should ultimately aim to become a place members can go to for financial advice according to life events – mortgages, investments, saving for college, etc.

Find technology solutions that deliver compounded value. Digital technology has the power to enhance the branch and omnichannel experience. Every detail of that experience should be engineered to ensure a powerful human touch is blended tightly with savvy technology. With modern technology, credit unions should be able to facilitate a frictionless member experience across all channels, arming them with a solid means to compete with new fintech startups and digital-only institutions.

With the right approach to transformation and strategic planning, branches can reinvent themselves to better meet the needs of members. It is doubtful that digital-centric players – with their limited physical presence and their focus on self-service interaction – will be able to deliver the high-touch, personalized services that branch teams can. The take-away here: Don't close the branch; transform it.

Joe Salesky is CEO of CRMNEXT, Inc. He can be reached at [email protected].