Branches Are Now as Useful as a Dead Parrot
This opinion piece is half of a new Credit Union Times feature Forum Focus, which will comprise opposing viewpoints on key credit union issues.
While most of us were busy dealing with regulatory assessments and fiats, an unrelenting onslaught of new consumer protections and compliance mandates, our business was changing. We used to be in the banking business (because credit unioning doesn’t roll off the tongue very well).
The banking business is all about process. In that business we developed processes to facilitate the transfer of currency between people. Those processes required that we build branch offices and have a physical presence for people to transact business with us. Those facilities had vaults and bullet-proof glass, dye-packs and, in some cases, man-trap entries and security guards. They had to be secure because we loaded up our vaults and safes with bundles of cash, which was the currency of the day.
Our members needed to come to us, at those locations, to transact business with us and get access to that cash. We even, begrudgingly, had weekend hours to accommodate them. Banking had to be done that way. Consumers had very few options.
Then, along came the automated teller machine. The ATM was billed as the branch killer. No longer would people have to come into your office to get cash. There were forecasts that all our tellers would be laid off and retrained as ATM technicians. But that never happened. If anything, branch building accelerated.
Why didn’t branch construction and expansion slow? It simply couldn’t because we were still dealing with the same thing: currency–greenbacks, sawbucks and Benjamins. We just developed another way for people to put wads of cash in their pockets so they could trade it with other people. They still needed a place to bring it and get it. Therefore, a thriving branch construction industry ensued. Back then, branching worked.
Similarly, Blockbuster video stores went from renting Beta and VHS tapes to DVDs and then Blu-ray discs, but their underlying retail-distribution model still worked. As a consumer, you didn’t have much of a choice. Going to the store was the only way to acquire the service. You had to get the physical product in your hand and take it home, stick it into a machine, watch it and then return it to enjoy the benefits–just like banking.
But a funny thing happened on the way to the video store. Movie content became digitized and a robust remote-distribution channel, the Internet, replaced video stores as the most convenient and cost effective way to watch movies. I can’t remember that last time I was in a Blockbuster. For more than a couple years, we’ve been a NetFlix subscriber household. In our house, we watch all of the movies we want through a Nintendo Wii game console.
Banking has evolved in a similar way. We don’t handle much currency any more (our VHS). We handle payments (our digital content). We try to establish relationships with our members to give them a reason to contact us and trust us to handle their payments. We try to become their trusted resource. What we do now can no longer be considered banking in the traditional sense. Rather, we now engage in financial services.
Financial services by its very nature requires a completely different mindset and approach to member service fulfillment, yet most of us still try to deliver financial service through the old retail branch cash-distribution model. That model was inefficient and expensive on a good day.
Today, our members don’t want cash. They want advice and help, and they want it when they want it and how they want it. Our new retail branch is our website and very soon, our smartphone app. We are constantly evolving the information we provide on our site and the approach we use to deliver it.
Members can contact us 24/7/365 through online chat, our call center and email. They can access information about their credit union and their accounts through our home banking, audio response and bill pay systems, as well as via plastic cards, online lending systems and smartphone apps (ATM locator, home banking app and e-deposit services). Note that only one of these systems gets them access to currency as we know it. The rest are all information and payments resources.
I realize that many of us have a lot of money tied up in branch structures and that the changes we need to make won’t happen quickly. But understand that our reality has changed. Realize that we don’t deal in cash. We deal in relationships that facilitate effective and efficient payments.
Also, understand that relationships don’t have to take place in person (ever heard of Facebook?). You can have more frequent, deeper, more relevant interactions and relationships with your members over the phone and online than you ever could at a branch if you spend the time, effort and money to develop them.
One final thought. Now I remember the last time I was in a Blockbuster. It was last week at their "going out of business sale." I was looking for old Monty Python videos.
Thomas J. O’Shea is president/CEO of Aspire FCU, Clark, N.J.
Contact 732-388-0477 or Thomas.OShea@aspirefcu.org