As Digital Continues to Rise, Branches Still Reign. Why?

For years, there has been talk within the credit union industry that physical branches are going the way of the typewriter or telex as members increasingly turn to digital tools to conduct their daily banking.

Despite this clear push toward digitization, credit unions nationwide continue to expand their physical footprint by making sizable investments in the acquisition/rental of retail properties, upgrades to architectural aesthetics to create a pleasing branch environment, and more.

Why?

The answer lies in the evolution of the changing relationship that consumers are beginning to develop with brick-and-mortar retail, and how these patterns will shape our physical communities in the years to come.

As someone who studies how market trends are shaped by policy shifts in the land use area, I’ve tracked how retailers (and the landlords who own commercial properties) who are reliant upon their conducting business via their physical storefronts, are progressively adapting to the relatively new normal of the Amazons of the world.

Those that are the most successful in today’s retail environment have physical spaces that both complement and supplement the online experience – not compete with it.

Think of using the Target app to place a reservation on your items, and then visiting the store to pick them up. Or going to Best Buy to view the latest Sony television in person, and placing the order for delivery at the register.

The coronavirus pandemic has both amplified and accelerated the simmering trends that we have seen fermenting within the financial services industry for years – a push toward digitization, but with physical touches that include the ability to make singular dedicated appointments for more complex banking matters such as taking out a first mortgage, getting financial and/or retirement advice, and more.

Today, the role of a branch is less firmly mechanical to a credit union’s operations and more people-centric. But it is unlikely the hulking branches of yesteryear will continue to dot the landscape of our communities.

As fewer financial transactions are being conducted in person by the next generation of members, branch footprints have been shrinking – a trend that has echoed across the retail sector in general. The nation’s largest shopping mall owners, which have been losing their largest anchor department stores en masse, are now looking at ways to transform the sites into live, work and play environments that successfully repurpose the ­properties for more productive usage.

These changes present sizable opportunities for credit unions to right-size their branch networks in key areas.

Banking is classified by urban planners as a neighborhood service akin to the grocery store, pharmacy or laundromat – essential local needs that due to technological and logistical challenges, are difficult to completely transition to an online service model, for now.

These new smaller pocket branches should be designed to accommodate the top-of-the-line mobile solutions many institutions have invested in as well as to supplement their online loan application processes. Plus, these pocket branches serve as the physical manifestation of a friendly local credit union brand – a 24/7 advertisement that is visible in the most dynamic areas of town.

The strategic positioning of branches, traditionally guided by the internal mapping of membership populations and the identification of underserved geographical areas, must be supplemented by an understanding of not only where exactly the communities served by a credit union are growing, but how. Strong partnerships with localities can help bolster this knowledge, as can keeping an eye on ever-shifting developmental norms.

In rural areas, where both residential and commercial land use patterns are significantly less dense and more automobile-centric, the trend of infill redevelopment manifests with the adaptation of older retail properties into more relevant and modern uses. This includes rows of neighborhood storefronts, the type in which a credit union would likely use for a local branch, increasingly being topped with rental apartments. In the denser suburbs, local train stations have become a focal point of redevelopment efforts, with municipalities and builders working together to bring more residents within walking distance of these newly-minted community centers.

Forward-thinking credit unions must embrace these developmental patterns, and build smaller-scaled branches in transforming areas in order to be in close proximity to current and potential members alike.

Credit unions of all sizes must take a hard look at their physical branch network and reorient their branches to meet the expectations of the 21st century consumer. In addition, executive leadership must take a hard look at prevalent real estate market trends to ensure that their branches are in dynamic areas that meet both the needs of membership and maximize the potential of attracting new members.

Digitization is not to be feared by retailers, but rather, must be embraced as one more tool to use in the provision of excellent member service. By striking the right balance, the industry’s sizable investments in physical space can be futureproofed – as can a credit union’s role in the greater community.

Richard Murdocco President The Foggiest Idea Inc. Long Island, N.Y.