America's CU Conference

What’s the Future of the Branch?

Offering multiple delivery channels doesn’t reduce branch traffic, study shows.

June 19, 2012

Despite the growing number of delivery channels, traffic at financial institution branches has remained constant since the 1970s. But in the future, branches will become more specialized and sales-focused.

That’s the word from George Hofheimer, chief research and innovation officer for the Filene Research Institute, addressing the America’s Credit Union Conference Monday. He says the credit union branch won’t go away in the foreseeable future, but it certainly will evolve.

Hofheimer cited findings from an Accenture report that sheds light on future directions for financial institution branches:

Offering alternative delivery channels (i.e., online, mobile, contact centers) doesn’t result in fewer branch transactions, just more transactions overall. “The more channels you build, the more people will use them,” Hofheimer says.

The branch presence is important for customer acquisitions. That because the digital channel hasn’t lived up to its promise in that regard.

Branches are becoming more specialized, likely targeting affluent and high-potential segments.

There’s been an increase in the use of remote advice and video tellers. This allows staff to spend more time on sales.

Hofheimer cites two schools of thought on the future of branches:
• Pro-branch. This school of thought believes branches will become smaller and leaner with advances in electronic delivery. It contends that face-to-face conversations are necessary for effective selling.

• Bearish on branches. This opinion holds that branch transaction volume will decline, as younger demographics point to an all-electronic future. Also, increasing competitive pressures from nontraditional players, such as online-only competitors, predict the branch’s decline.

Ultimately, the biggest driver of branching in the future will be credit unions’ operating strategy, Hofheimer says. Some credit unions, seeking expense reduction, will reduce their branch footprint, while others will use technology to automate transactions and focus more on sales and service.

“Demographics and other outside factors will define consumers’ channel choices,” he adds. “And leapfrogging technologies are always a potential game changer.”