The Great Unlock

businessman pushing open a giant keyhole in a stone wall to reveal blue sky
Contributing Writer
member of Bellco Credit Union

13 minutes

Credit unions will keep some of their pandemic-driven service strategies when restrictions ease up.

Nobody planned for the arrival of a pandemic in 2020 and its urgent lockdowns. Will credit unions be prepared for the unlockings that may be possible in the latter part of 2021? What does being prepared mean? We asked industry thinkers for their observations.

Don’t expect a precise ending to pandemic concerns, advises Larry Pruss, SVP of CUESolutions Bronze provider Strategic Resource Management Inc., Memphis. There will always be viruses and mutations and heightened safety consciousness from now on, he suggests, so a return to 2019 normal is unlikely. Herd immunity—where statistically each person who contracts the virus passes it on to fewer than one other person—won’t come quickly, he predicts.

Common wisdom has it that the pandemic accelerated but did not change the direction of the big migration to self-service digital banking. While some members will return to their unlocked branches after the virus retreats to see demos and hear explanations of how new self-service options work, convenient self-service banking will continue to be the first option, predicts Jessica Bing, chief communications officer of $940 million Telhio Credit Union, Columbus, Ohio.

Most CUs won’t go back to the status quo of 2019 when COVID-related restrictions go away, says Jim Burson, managing director of CUES strategic partner Cornerstone Advisors, Scottsdale, Arizona. “Lessons were learned,” he notes. 

How members choose to visit branch lobbies is a good example. Setting up appointments to come into the physical branch became necessary when the virus was raging. Once the virus is tamed, some members may go back to walk-in, he speculates, but others will continue to make appointments because they find it more efficient than having to wait. 

“How long the crisis lasts matters,” observes Steve Reider, president of CUES Supplier member Bancography, Birmingham, Alabama. “The longer it goes on, the less likely things are to bounce back.” 

Betting on digital acceleration may be a mistake, Reider warns, pointing out that the period between 2015 and 2019 showed an overall decline of 35% in branch transactions—and as much as 60% for some, according to Bancography’s internal client data. Many of those who have already moved are likely early adopters—including tech-savvy younger people.

“The quick movers have already moved,” he says. “What’s left are the slower movers, so that works against acceleration.” Changes caused by the end of the pandemic will be gradual, not sudden, he predicts. After 9/11, it took two years before air travel returned to pre-9/11 levels, he points out.

Kevin Blair would explain the situation differently. Technology is moving incredibly fast, and gradual changes could be futile, says the president/CEO of CUES Supplier member NewGround, St. Louis. 

“Too many banks and credit unions are making a strategic mistake by rushing to introduce self-service technology in their branches,” he argues. “Technology is changing too rapidly for most credit unions to stay relevant. Loading branches with ITMs (interactive teller machines) could be a waste of money. In 10 years, we’ll all likely carry ‘the branch of the future’ in our pockets, making this technology investment obsolete.”

Rolland Johannsen
Senior Consulting Associate
Capital Performance Group LLC
The bigger question they need to ask is, ‘Do we really need a headquarters building?’

What Doers Are Doing

When Telhio CU locked the doors of its nine branches in mid-March, six in its Columbus, Ohio, base market and three in the Cincinnati area, branch activity shifted suddenly to drive-thru lanes with a few inside appointments, Bing reports. Mobile banking, which already had reached 80% penetration, also saw increased activity. What role would reopened branches play? “During the closures, we were rethinking and adapting our branch operations strategy,” she says.

When the branches reopened in mid-October, things did go back to normal. Almost. Drive-thru and mobile still were more active than they were pre-COVID-19, Bing reports, and Telhio CU branches were making greater use of interactive banking kiosks. Those kiosks, made by Hyosung, are walk-up stations, partially enclosed with privacy screens, that perform ATM functions. Telhio CU currently has two of these kiosks in service inside branch lobbies and has plans to add four more in 2021, she says. 

Future branches will be about 2,100 square feet; older ones were more like 5,000, she notes. Eventually small, high-tech branches will have two interactive kiosks, and large branches up to four, she reports. Walk-ins already are welcome, and more members will show up after vaccination, she predicts. Large branches will have room for walk-ins to wait for service. To alleviate wait times, the CU is upgrading its appointment technology to promote scheduled meetings whenever human staff are involved, she explains.

“The pandemic encouraged us as well as our members to try new things,” says Mary Svoboda, interim president/CEO of $496 million JAX Federal Credit Union, Jacksonville, Florida. “We gained flexibility. Some tellers moved to the contact center or to collections. They picked up new skills. Now they’re prepared for the higher-level activities that will occur in branches in the future.” 

The CU closed one branch and opened another during the pandemic, she reports. The closed branch was three miles from a new one, and that was too close to justify keeping both because of changing member behavior. 

“Members used to require physical convenience for frequent visits,” she explains, but now they’re more likely to come in twice a year instead of monthly, so distance is less important. The new building was a former bank branch, configured in a traditional way, she adds; it offered more amenities, including a drive-thru, which really came in handy during the pandemic, she reports.

Pre-COVID-19 moves should pay off after the pandemic, some CEOs expect. 

“We’d already redesigned our branch layouts around pods,” reports CUES member Robert Falk, president/CEO of $1.6 billion Purdue Federal Credit Union, West Lafayette, Indiana. “The teller lines are gone. And we moved from tellers to universal service reps five years ago. It took personnel changes, compensation changes and a lot of training. Our people must pick up on signs that a member might need a service.” For example, if a member makes a large deposit with a check, a teller might inquire about making a referral to the investment team. “We had been missing the signs before. Now we’re working to notice them.” 

18 Permanent Branch Closures

Some CUs made bold moves during the lockdown. For example, $965 million Marine Credit Union, in La Crosse, Wisconsin, locked branch doors and unlocked digital services during the pandemic. At press time, the doors of its 19 operative branches remained locked—continuously locked since March except for appointments—but that’s temporary, explains CUES member Katie Tolokken, chief operating officer. What’s permanent are the 18 former branches or loan production offices that were closed in 2020, she adds. Legacy branches made up about half of the CU’s network; Marine CU has been active in mergers, listing 19 acquisitions between 1972 and 2018 in its 2019 annual report. 

Now, Tolokken reports, Marine CU is investing in more robust digital services and self-service equipment like 24-hour smart ATMs that are expected to handle 90% of the transactions formerly done in a branch.

Tolokken says that 80% of Marine CU’s workforce is working remotely. She expects that percentage to decrease but remain high. “COVID has brought opportunities as well as challenges. Our team’s roles have evolved, and many find these updates satisfying.” 

Jim Burson
Managing Director
Cornerstone Advisors
It’s hard to transform when you’re struggling to sustain basic operations. People are rethinking roles, but the virus has delayed the transformation of human capital.

Post-Pandemic Operations

Before COVID-19 shut down physical locations, branch transactions already were falling, Reider notes. The five-year 2015-2019 period showed a 35% decline in in-branch teller transactions for financial institutions generally and as much as 60% for some, he points out. “That’s a precipitous decline.” But account openings were still happening in branches 90% of the time, he adds.

Such basic transactions as deposits and withdrawals—the primary activity of tellers—continue to vanish rapidly from branches, Blair notes. Consumers still prefer to come to a physical branch to open accounts and establish their primary banking relationship, but COVID and improvements in online account opening and loan applications are eating into that need to return to the branch as well, he says. 

The data show that COVID-19 has permanently cut branch activity, Blair insists. In national NewGround surveys conducted last spring, 20% of bank and credit union users said they would not go back to branches for their post-pandemic banking. By November 2020, that number had jumped to 31.8%. “The longer the pandemic restrictions are in place,” he says, “the more consumers are getting comfortable with conducting their banking through digital channels and are less likely to return to branches for routine business post-pandemic.” 

Before COVID-19, 60% of consumers said they would prefer to go to a branch to apply for a loan. By February 2021, that number had dropped to 43%, Blair points out. “Members can do almost everything online, but those transactions and activities still have to be processed. The contact center is becoming the centralized processing center,” he says. “Lending and contact centers are converging into a digital experience center.”

The so-called valuable activity that will replace routine transactions in CU branches, Reider says, will include the traditional complex or sensitive transactions and financial advisory services will grow. “CUs are already rolling out financial health audits and education and remediation programs to help members build financial security,” he explains, “and to help the CUs gain the same trusted relationships the member would have with their lawyers and CPAs. That will grow over time.”

Curbside and drive-thru service soared at retailers, including credit unions, during the pandemic, and that should persist. 

“Consumers have developed a new mindset,” Blair notes. A drive-thru with a full-service ITM is a functional mini-branch, he points out, and can work on or off traditional branch premises. Today, consumers often like to do their banking through digital channels without getting out of their chairs, but sometimes they also like to do it without getting out of their cars. 

CUs with concentrated local membership—small distances and few branches—will be more likely to upgrade those branches, Pruss notes. CUs with dispersed membership will be more likely to close branches and rely largely on digital channels.

Many CUs are still looking to expand their branch networks, says Jenny Bengeult, EVP/director of design for CUES Supplier member Momentum, a design-build company based in Seattle. “Most have growth strategies and still see branches that are strategically placed and designed as a way to attract members. And they see light at the end of the tunnel with the spread of vaccines. Many are seeing this as an opportunity to expand.”

Influenced by COVID-19, branches are not the only place members and member service reps are having real-time, face-to-face conversations, Pruss points out. The pandemic dramatically increased the use of video conferencing. Zoom zoomed. Businesses and even consumers scrambled to add one or several of the services that sprang up. It’s time now, he says, to review the options and put real thought into which systems work best for conversations with members and for internal meetings.

All the Zoom experience makes members more willing to talk to CU staff remotely, but that potential has barely been tapped. “Many CUs have used Zoom technology internally but not so much yet for the member experience,” notes Rolland Johannsen, senior consulting associate at Capital Performance Group LLC, a CUES Supplier member based in Washington, D.C. “We may see more trials there as a result of COVID.” 

Video technology will accommodate live conversations about things like loan modifications, investments and trust accounts, Svoboda thinks, but members still like the solid feel of walking into a real building, knowing the CU exists in the real world, is still a place they can go and not just a URL in the cloud.

Post-Pandemic Psychology

People’s activities have been changed by the pandemic, but so has their thinking, so prepare for new attitudes, the experts say. It may not be a game-changer, but there will be a psychological unlocking once the threat has passed, Burson suggests. 

“People need to see other people, to walk up to them and smile and talk to them, just because they can,” he says. “There will be a pent-up desire for personal interaction that will bring some members through the branch doors. It’s hard to say how many or for how long.”

Reider also says pent-up demand for social connection will be a factor. “Just look at what’s happening to Disney stock,” he notes. “Investors clearly think a lot of people will take vacations when they think it’s safe. People like digital convenience and self-service, but they also hunger for human contact. That’s why people continue to eat in restaurants and go to movie theaters.” 

That hunger for human contact could temporarily bring some members back to CU lobbies, he suggests, but probably not enough to reverse the digital momentum.

Some members may come back to the branch for a hug, but don’t expect them to be patient in the digital channel. “Consumers using digital channels are far less patient than when they use physical channels,” Blair notes. When a member using a digital channel needs assistance and pushes the help button, the credit union contact center needs to respond within three to five seconds, he says.

Since the lockdown, there has been a 72% increase in the use of fintech apps in Europe, according to Forbes, with the U.S. probably close behind, Pruss points out. These apps are usually frictionless and influence user expectations. CU members will have less tolerance for slow or complicated online and mobile banking apps, he notes.

Staff will also have attitudes. CUs, like all employers, will have to deal with employees who reject the vaccine, Pruss warns. They will be dealing with questions like “Do we require vaccination? Do we replace staff who refuse or do we find positions where they can work remotely?” And since masks and distancing have become symbols in a culture clash, how will CU management deal with members who still expect safety precautions or members who find them offensive?

And, paradoxically, the end of the pandemic may increase pressure on staff to retrain. The pandemic may have accelerated the move to self-serve digital transactions, Burson notes, but it has slowed down the training of staff to take on new roles. 

“It’s hard to transform when you’re struggling to sustain basic operations,” he observes. “People are rethinking roles, but the virus has delayed the transformation of human capital.”

And, of course, there are work-from-home attitudes to deal with. “The cat is out of the bag for working remotely,” Svoboda says. “Worker satisfaction will be more important in the future. Many workers found they liked not being tied down. We will need to accommodate them, or they might leave. Remote work also expands our talent pool. 

“We will have to rethink the tried-and-true management practices,” she adds. “Circumstances have opened some doors, and we will have to recognize and manage those opportunities.”

How radically will CU managers need to rethink? Maybe a lot. “People are asking, ‘Do we really need this branch or that branch?’” Johanssen notes. “The bigger question they need to ask is, ‘Do we really need a headquarters building?’”

“The big lesson we’ve learned,” Tolokken sums up, “is to expect the unexpected.”  cues icon 

Richard H. Gamble writes from Grand Junction, Colorado.

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