BELFAST, Northern Ireland–Credit unions were urged to rethink their approach to branching, including how investments are allocated, how square footage isn’t the most important branch issue, and even how compensation is paid to employees.
In remarks to WOCCU’s World CU Conference here, Terence Roche, co-founder of Cornerstone Advisors, was clear he was not advocating an end to the branch. Instead, he called for an end to much of the thinking that has traditionally surrounded the long-time staple of service delivery.
“Until 10, or maybe five years ago, the branch was at the center of a very simple delivery strategy,” said Roche. “It was about traditional media advertising with one goal—drive traffic to those branches. Once they got to the branch the goal was to cross-sell the traffic.”
The advent of digital technology has meant a new branch model that is evolving very, very quickly, said Roche.
“Branches are no longer at the center of delivery strategy; they are now one element of a cross-channel delivery strategy,” he said. “The first piece of member engagement now may not occur in branches at all. And now if a buying decision is made, there is multi-channel fulfillment.”
Roche said every CU must think about member engagement as part of a really big picture.
“What you have to think about is how do you want your branches to fit into that picture moving forward? You need to keep in mind the environment in which a branch is operating right now.”
Roche said there are five pieces to the branch design discussion: design, employee skills, technology and information, member engagement, and investments. Here’s a look at each:
While the number of branches continues to slowly grow, the traditional branch footprint, said Roche, has shrunk from 2,116 square feet to between 800 and 1,500 square feet, with the smallest branches at 400 square feet.
“What we know is branches aren’t going away,” said Roche. “But they’re smaller, leaner and doing different things.”
Roche noted there has been a lot of talk around branch design and various conceptual approaches. But what is most common among those new designs is the assumption that volume is down (50% over last eight years in the U.S.). The result is branches are much more about experience. Common traits include using the front of the office to attract members using some sort of visual differentiation using retail concepts; there is typically a greeter/info area; an “education” session where members can go to learn to use new tools; an area called the “connect,” often a private or semi-private area for discussion; an area for traditional tellers, usually near the back in order to encourage self-service; and a “brand wall,” where members can touch a screen, get an answer about a question, do some interactive transactions, etc.
Roche acknowledged the description above refers to a branch design scenario that is still relatively new and has various iterations.
In most branches being designed today transactions are designed to be self-service, said Roche, noting that ease of use is the best predictor for whether members will use a new platform, technology or service. One key with self-service options, he said, is dedicating a lot of staff time to encouraging and training members how do conduct transactions on their own, especially early. There will always be a certain percentage of members who will not want to use video-tellers, he said, but the bulk of members will transition to the technology.
“I’ve spoken to many credit unions that say, ‘We know that on day one this isn’t going to work. But if we look out five or 10 years, we don’t know if we can have the branch footprint we have now, and this kind of branch might be the only way we can stay in the community,’” said Roche.
Employee Skill Sets/Technology
Roche said the common concept today for branch staff is the “universal associate,” someone who is a channel expert, an advocate, a lender, an investment referrer, a community representative, a social media expert, and a high performer who has significant financial opportunity.
“One of the things we’re seeing is that institutions have to have branch people who are experts in those other channels, and they have to be advocates for those channels,” said Roche. “Branch people don’t like that model because they believe they are making themselves obsolete. That’s why I keep going back to the Apple example. One of the greatest assets they have is the people in those Apple Stores. I’d suggest you go back and find out how many of your people in branches use your applications. I think one of the things you will have to think about is the person who knows the most about your online loan app, how to apply online, might be that person in the branch. They make the branch more relevant, not less relevant.”
Roche said he believes it’s time for CUs to rethink compensation so that high performers can even make as much as twice the amount earned by average performers.
Another tricky issue is what happens to the sales process, and related incentives.
“I will bet a large number of your sales goals are in your branches with your branch people, including call centers,” Roche said. “The challenge is what happens if I don’t buy through the branch. Who’s got that sales goal? I think we’re staring to see sales breaking out into different pieces. Sales goals and tracking will be divided: lead, close, fulfill. Sales credit will be split, and compensation could be shared. If sales are going multi-channel, then sales compensation may have to go multi-channel.”
With most Millennials indicating they typically only visit a branch once per month, if at all, the question every CU must ask itself is what is the branch’s role in maintaining a relationship with that Millennial member, said Roche. It may be that your branch staff still interacts with that member, but in a different way: email, social media, etc.
“You just can’t have the branches be isolated any more.”
Investments In Branches, Solutions
Roche said that moving forward the system a member uses to apply for something online needs to be exactly the same system the employee uses, with the information being the same. That also includes a single system for problem tracking.
“A consistent set of information and consistent experience is critical, so if you’re thinking about branch design you have to think about the systems to be used, so it’s a single platform with different permissions,” said Roche. “This is going to be a journey. Your vendors and your systems aren’t there now. The people side is far more important than the layout and branch design side, which is what people usually think of first with a branch.”
Roche said that if members move to new channels and employees go to new channels, a credit union’s investments must go to new channels.
“The fact is your members are touching you more often through digital channels, yet in our client base, 71% of their investments are in branches,” he said. “Sit with your team and ask, ‘In five years what percentage of new accounts are going to get started in a branch?’ Over the course of time you need to have a specific goal of moving some of that money into new channels. You need to use that branch design, the fewer employees, to fuel that cross-channel capability you’re going to need moving forward. We call that reduce and redirect.”