Why do Credit Unions Operate more Advanced Branch Networks than Banks?
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17 September 2010
Celent fielded a survey among North American financial institutions in July to better understand the current state branch technology environment as well as likely midterm and longterm evolution. The results were surprising. [caption id="attachment_1781" align="aligncenter" width="563" caption="CUs Operate More Advanced Branch Networks"][/caption] CUs have a much more advanced branch environment. Compared to banks: – 34% more use teller cash dispensers, 8% more use teller cash recyclers – 25% more use automated acct. opening systems – 23% more use automated loan origination systems – 23% more use image ATMs – 20% more use in-branch self-service technology The only branch automation technology areas in greater use among banks than credit unions are CRM solutions which are more common among larger financial institutions. Why would this be? What led credit unions to more consistently invest in branch automation technology than banks? I recently spent a day with the Association of Credit Union Senior Officers hosted by EasCorp in Burlington, MA.. The interaction solidified my thinking. Size and simplicity. Credit unions skew small. Most are well below $500m in assets. Small ships can turn fast. Smaller organizations also lack the multiple silos found among large organizations. Lastly, CUs typically have a single line of business. In contrast, many banks have multiple lines of business competing for capital budgets. IT infrastructure. CUs are more likely to be operating a single branch environment from a core processor, and more CUs run real-time core systems. In contrast, a higher percentage of banks operate multiple environments and are more likely using solutions from independent software vendors. Multiple environments means more lengthy and costly implementations. It’s easier to say “no”. Culture. CUs have a parsimonious culture. In addition, they seem more driven to grow their member base through referrals than mass marketing campaigns. This historical drive towards improving customer service has resulted in a commensurate spend for automation. The complete research results are detailed in the Celent report: Branch Banking in a Multichannel World: What ever happened to the “branch of the future”?
Another thing I note in the results are that the CUs seem to be significantly ahead in what might be referred to as "transactional" technology (cash dispensers, automated origination systems, etc.). I would guess that would be to enable their branch personnel to have more time for consultation, cross-selling, upselling, etc. but the technology investments for those capabilities (CRM, analytical, etc.) don't reflect that. Is it just that CUs are more interested in doing more transactions faster or that the branch operations budget is easier to approve?
Interesting thoughts. Another way of looking at this is that CUs tend to be heavily obsessed with automation, and may in fact implement technology for technology's sake. Your thoughts regarding less competition for capital expenditures are valid, but I would add that the typical CU has less board oversight and thus more freedom at the management level to acquire technology. Finally, with the overall decline of checks - and especially consumer checks - you have to wonder if further teller line automation makes sense . . . the typical consumer is less likely to have any checks (payroll, personal, or otherwise) than at any time in memory, and thus the traditional reasons for visiting a branch (making deposits, cashing a check) are rapidly going away. In the presentation I'm currently doing on "The Future of the Branch" I make the point that all FIs need to carefully assess the current levels of activity in their branches, and begin measuring trends in order to identify how consumers and businesses are changing their banking habits.