Is Your Branch Strategy Keeping Up with the Jones's?
Posted by Mr. Anthony Burnett, Customer Experience Director, LEVEL5, LLC on 10/4/2018

The Five Questions Every Credit Union Needs to Answer About Their Branch Strategy

The traditional financial institution business model of the past was built around a decentralized branch strategy. Find a heavily populated area, sprinkle a network of easily accessible branches around it, and watch the growth happen. Pretty simple, right?

It worked like magic.

The psychology behind putting branches everywhere was intriguing: more branches implied a financial institution was doing well, so one’s money was somehow more secure. It wasn’t necessarily true, but it still seemed that way. Then the Great Recession hit. The large banks initially took the greatest blow, shuttering branches left and right. Then regional and community-scaled players (including some credit unions) continued the trend, despite the economic recovery that followed years later.

Market density matters.

What could have kept some of these recently closed branches open? Why close so many, even in places where there wasn’t a lot of competition? Turns out, maybe each financial institution’s misunderstanding of market density came back to hurt them. Given these ever-changing times, what kind of density solution is required to be successful?

Larger financial institutions often close branches, not because of a shift toward digital and mobile channels (it’s certainly a factor), but a failure to plan for them in the first place. Though customers demand omni-channel options, at times, they still desire face-to-face contact with their branch. The latest surveys show the branch is a key channel: 

What happens when a branch closes?

Closing a branch is a short-term solution, that while saving money initially, has long-term implications. Studies have shown that up to 40% of consumers will change their financial institution if their branch leaves the area.

Before you build your next branch, consider the following questions:

  1. Does your branch need to be large or small?
  2. Should the branch be fully-automated, or mostly?
  3. How can the credit union’s staff be convenient to the member?
  4. Does it have to be a freestanding facility?
  5. Is a branch even right for the particular area?

So what’s the answer?

Perhaps many financial institutions have done a poor job identifying the real opportunities for growth in their markets. Branching today takes considerable planning and precision, and if not done well can lead to unprofitable locations that are a drag on the institution.

Market densities matter and the deployment of the right density matters even more. Density solutions are important and they do not always result in freestanding branches, which can be short-term considering the expense and risk. It’s really about convenience for members and their needs.

Branch site selection done well can have a tremendous impact on the credit union. However, the process is combination of science and art. To learn more, check out this article on The Art of Branch: Site Selection Edition.

Categories: Education & Training, Marketing & Printing, Research, Sales & Service, Strategic Planning & Consulting
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