Headlines about openings and closures don’t tell the full story of credit union growth.
Like most news headlines, those announcing bank location closures are often over simplified and constructed to support one position or another—whether that’s the idea that technology replaces the need for branches or that human contact remains critical to productive financial relationships. Take these headlines as examples:
“Banks Shutter 1,700 Branches in Fastest Decline on Record” – Wall Street Journal, 2018
“JPMorgan Chase To Add 400 New Branches, Raise Wages Because of Tax Cuts” – cnbc.com 2018
“Wells Fargo is closing 400 bank branches” – CNN, 2017
To gain perspective about what’s really going on, let’s look at the numbers.
Between 2005 and 2008 new branch openings were nearly double closures. Between 2009 and 2012, this changed to more closures than new openings. This trend reversed in 2013 and then tipped downward with 1,700 closures in 2017. Does this trend parallel development and customer/member acceptance of new technologies or ups and downs of the economy?
Most studies suggest the recession forced financial institutions to make difficult and critical changes to their physical delivery system strategies and consider branches as just one of many delivery channels. For example, Bank of America had 6,000 branches in 2010 compared to 4,500 at the end of 2017. Why so many closures in 2017, you ask? Reports indicate that large banks are more likely to be growing branches than smaller institutions. This may be due in part to early downsizing and ability to invest in new technologies while still enjoying large-scale marketing efficiency, then reengineering their networks as the economy rebuilt.
The recent announcement will bring BoA’s total branch number back to 5,000. Why the reversal? Close analysis of target customer needs and wants, brand positioning and competitive necessity projected into the foreseeable future drives these decisions.
During the five-year period ending 2017, credit unions exceeding $5 billion in assets expanded their branch networks by 21 percent. In comparison, credit unions between $100 million and $250 million in assets grew their branch network by 6 percent. The net increase in branches does not reflect all the expansion activity. Individual also credit unions are accelerating branch expansion through mergers.
Glenn Christensen, president/CEO of CEO Advisory Group, Kent, Wash., helps conduct merger partner searches and guide credit unions through the merger process. He is finding that “mergers have become an increasingly important strategic component when entering new markets. Considering that it takes five to seven years for a branch to break even—and even longer for a credit union to recover costs and make a return on investment, mergers have become a highly effective way to enter new markets with considerable less financial risk.”
Credit unions must clearly understand where they are today and where they are heading before closing or opening a branch or merging. The work up front helps ensure resources are used to the greatest advantage and the member experience is productively enhanced.
Benjamin Stangland, VP/operations and principal, Weber Marketing Group, Seattle, offers the following advice about how to decide what’s next for your branch network, digital delivery and omnichannel integration:
- Conduct a brand review to be certain you are making choices that create powerful member and staff experiences and will maximize the return. Evolve your brand based on service and product goals and your target market. Be critically honest about where you are today so you can effect change at the right points in your evolution.
- Complete a growth and delivery study to gain a clear understanding of where you are today in terms of physical and remote delivery performance and what factors will drive future performance, such as assessing the member journey and driving solutions to the bottom line. Then define what steps to take toward perfecting your future business model.
- Develop a fully integrated and seamless member and staff experience across all delivery platforms. This includes developing new physical delivery models that maximize each market opportunity and viscerally reinforce your brand.
- Develop a detailed roadmap and scorecard to organize multiple responsibilities and drive the entire credit union toward specific performance goals. It is most effective to select a champion for this immense initiative. Many credit unions are evolving staff to titles like: “experience manager” to provide a single point of coordination and motivation.
Success in these efforts correlates with unbiased assessment of past actions and a clear unfiltered look toward the future. Many credit unions will find this is difficult to accomplish internally due to personal and organizational baggage. Not unlike a therapist, an independent consultant can look through fresh eyes and bring a world of experience to each credit union’s self-assessment and actions going forward.
There is a great deal of opportunity for credit unions to grow and prosper through strong brand definition and perfecting branch and remote delivery platform integration. Every credit union will and should get there in ways specific to their own brand and opportunities. As Jim Marous, co-publisher of The Financial Brand, puts it: “Each organization needs to make an independent choice whether to double down on branches or allocate future distribution investments to digital capabilities. Even if a pro-branch decision is made, it will still be important to build strong digital capabilities to support an increasing digital marketplace.” And your best growth strategy could include a merger, too.