Is Shared Branching Dead?
No, say two experts who dispel this and other misconceptions about this member service.
Credit union members widely support shared branching because they can make numerous personalized transactions, regardless of location. Yet credit unions often fail to adopt this important service due to a set of misconceptions, namely:
Misconception 1: Shared branching is too expensive
Is shared branching an expense? Yes, but it should be perceived as an investment, with the potential for quickly realized returns.
All credit unions participate in shared branching as issuers, meaning they allow their members to visit other locations in the network.
Credit unions can also participate as acquirers, handling transactions for guest members in some or all of their facilities. As an acquirer, a credit union has the opportunity to generate revenue, or at least offset issuer costs.
For issuer-only institutions, by providing convenience a credit union can expand relationships and eventually see financial gains. When properly executed, participating in shared branching as both an issuer and acquirer enhances a credit union’s value proposition.
Credit unions that participate in shared branching, particularly those that do so as acquirers, may see higher than average balance-sheet growth—particularly in loans, shares, and assets—because members use the credit union more often.
According to figures cited in "Shared Branching Realities Revealed," a white paper by CO-OP Financial Services, “Credit unions that do shared branching, particularly those that participate as acquirers, may see higher than average growth in their balance sheet due to their members utilizing the credit union more often."
The report reveals that 12-month loan growth was 275% higher, share growth was 34% higher, and asset growth was 29.2% higher at issuer/acquirers compared to issuers only.
Misconception 2: Branches are a dying breed
While mobile banking, online banking, and ATMs with enhanced capabilities have lessened brick-and-mortar foot traffic, branches remain important. They convey to members that their financial institution is stable, viable, and focused on growth.
In fact, credit unions are taking a fresh approach to branch design and services to attract members who expect more from the experience. Some credit unions are even creating a Starbucks-like atmosphere where members can receive advice on mortgages while using free Wi-Fi.
Branches are quite vibrant, according to “Performance Analysis: Branch Network Expansion, a Five-Year Evaluation of the Link Between Branch Network Growth and Performance,” a report published by Momentum in association with The Financial Brand. Based on performance metrics from 2007-2012, research indicates that credit unions that added branches beat those that didn’t on asset growth, member growth, loan growth, and return on investment.
Across all asset groups, credit unions that added at least one branch doubled the asset growth of those that did not increase their network size. Plus, 70% that increased their branch networks increased membership.
For credit unions with assets greater than $1 billion that added at least one branch in the five-year span, 44% had a higher return on assets than credit unions that didn’t add a shared branch. Also, credit unions that added branches increased loans originated per full time employee by 12%, compared to a 15% decline among credit unions that didn’t increase their branch network.
Even if shared branching locations don’t share a credit union’s name or logo, they can be branded so members associate the two. You can serve your members better with more branches.
Shared branching is not too expensive; in fact, it’s an investment in new revenue streams. And it’s not an outmoded contact point.
Rather, shared branching directly addresses what members—even young members—tell us they expect in an age in which convenience is king. Expanding member convenience with shared branching and enhances service offerings and deepens member relationships.
Click here to download the full report.
CRAIG BEACH is president/COO at CUSC, a subsidiary of CO-OP Financial Services, Rancho Cucamonga, Calif. Contact him at 678-812-1322. SARAH CANEPA BANG is president/COO, FSCC, LLC, and chief strategy officer for CO-OP Shared Branching. Contact her at 800-782-9042, ext. 1205.