Behind Every Beautiful Branch Is a Team of Data Analysts
Before the creative aspects of a new branch rollout can be applied, a solid foundation of strategic decisions must be made.
The “CU Branch Strategies” issue is one of my favorite CU Times print issues to work on, because a lot of it is about the design of beautiful spaces. Call it a happy place in my brain – I love thinking about, looking at photos and videos of, taking pictures of, staying at and planning my own designs for living spaces, and the more colorful and visually pleasing, the better. Give me an hour to wander around an Ikea, and I’ll come out in a better mood.
There’s no reason why credit union branches can’t be showroom-worthy, and in recent years, some have been putting an effort into their retail spaces that would make the cast of the hottest new HGTV show proud. One of them is On Tap Credit Union ($371 million, Golden, Colo.), which was founded to serve Coors Brewery employees and meticulously designed its two branches to resemble tap rooms (learn more about On Tap’s locations and branding in the feature story on page 6).
One outcome of opening a credit union branch where the interior, and sometimes exterior, design is focused on a theme or an extravagant showcase of the credit union’s brand, is the “wow” reaction visible on the faces of people who visit the branch. A member may even share photos of a cool-looking branch on social media with a caption like, “Can you believe this is where I do my banking?” An impressively-designed branch can certainly leave a positive effect on a credit union’s reputation, but another goal of a brick-and-mortar location is business growth – more members, more products per member, and more referrals for more members.
And achieving that requires no analysis of colors and textures, but rather the analysis of data. Before the creative aspects of a new branch rollout can be applied, a solid foundation of strategic decisions must be made – including decisions about where the branch should be located, how big it should be, how it should be staffed and what services it should offer – all of which determine whether the branch is a success or failure from a business growth standpoint.
To get a sense of the data analysis and strategic decision-making that goes into a new branch opening or branch remodel (because unlike thoughts of creative design, thoughts of numbers make my brain hurt a little), I reached out to two experts: One with Fiserv, which, aside from its many technology solutions offers a branch strategy consultation service, CUAnalyst Market; and one with the world’s largest credit union, Navy Federal ($156.6 billion, Vienna, Va.).
Terry Johnson, an advisory services consultant for Fiserv, said when it comes to deciding where to open a new branch, factors vary based on what the credit union hopes to achieve; for example, if the goal is to attract more members, it will want to look for an area with strong household growth, and if it’s to increase commercial accounts and business lending, it should target a business district. He added credit unions should consider the level of market saturation in the chosen area (i.e., competition) and the impact that could have on their growth goals by asking questions like: Which competitors are in the market? And, can we construct an effective take-away strategy to grow through making competitor customers our members?
The location choices that Navy Federal made for its most recently-opened branches were based on factors that fall in line with Johnson’s advice. In the past two years, Navy Federal opened 18 new branches in nine states and completed more than two dozen branch renovations; it now serves its members, 45% of whom are directly tied to the military, at 357 branches worldwide. Keith Hoskins, EVP of branch operations for Navy Federal, said in the credit union’s 90 years of service, it has placed branches as close to its members as possible – 59% of all Navy Federal members live within 30 minutes of a branch, and in 2022, 40% of members visited at least one of them. “Another factor that plays into new branch locations is our potential members, as this is an area that has a great number of people who qualify to be members, but haven’t yet joined the credit union,” Hoskins added. “When we do decide to open branches in these locations, we’ve seen an increase in membership. Additionally, we tend to open branches when there is a need for on-base financial support.”
Johnson drilled down further into the topic of branch location choice, noting that credit unions should compare their branch share in a given region to their market share in that region. As a rule of thumb, if a credit union’s branch share in a region is 5% or less, its market share in that region should equal its branch share. However, he said, if its branch share in the region is between 6% and 8%, it has the opportunity to increase or even double its market share there by focusing on maximum efficiency through a hub-and-spoke branch model – the concept of one main branch supported by a number of smaller locations. So if a credit union opens a group of branches that fit the hub-and-spoke model, and those branches represent between 6% and 8% of the financial institution branches in that region, it can potentially gain between 12% and 16% of the market share in that region.
Once a location has been solidified, what numbers must be crunched to determine what services should be offered at that branch, and how it should be staffed? Johnson said the first consideration is segmentation of the branch’s market – if the branch is serving the same market as a branch that’s been open for a while, and the older branch has been successful, there’s no need to make changes to the service lineup. When it comes to staffing, if a credit union follows the hub-and-spoke model, it should first deploy technology that increases efficiency and reduces member wait times, such as teller cash recyclers (TCRs) and integrated teller machines (ITMs), then hire staff who is not only skilled with the in-branch technology, but in providing advice and guidance for complicated transactions. “The experience the credit union wants to provide must be defined in advance and, once agreed upon, acquiring the technology and talent within the right environment to enable that experience is critical,” Johnson noted.
Efficiency is also top of mind for the people behind Navy Federal’s branches. During the credit union’s recent branch renovations, its goal was to improve the member experience while guaranteeing the highest level of operational efficiency, Hoskins explained. Some of the moves it made to support this goal included reducing the number of tellers and adding more platform workstations conductive to lengthier financial health discussions, moving equipment from the back of the house to be member-facing to allow staff to maintain contact with members, and teaching members how to use the branch lobby ATMs quickly and efficiently.
When an individual or family rents or purchases a new home, they typically conduct a good amount of research around the home’s location and costs before getting to the fun part of picking out furniture and décor. The same can be said for credit union leaders opening a new branch – and when it comes time to focus on the vibe of the branch, I say go all out. Create a whimsical and colorful aesthetic. Pick cozy furniture. Make sure it smells good and play mood-boosting music. Put in a ball pit and a petting zoo (OK, maybe don’t take it that far).
I look forward to continuing to follow the unfolding journey of credit union branch evolution, especially now that more and more credit unions are creating spaces that people want to spend time in, not places that exist solely for the function of completing a dreaded chore.