May 20 '22

Bland or Bold? Branch Design as an Avenue for Financial Inclusion

Ellen Garnett Kladky
Ellen Garnett Kladky
PhD Candidate
University of California, Irvine
Wesley Sweger
Wesley Sweger
JD Candidate
University of California, Irvine School of Law

What is the first thing that a visitor to a credit union's website sees? Is it a special offer for a low rate on an auto loan? A list of popular products? A banner offering seasonal help with tax returns? Whatever it is, the front page of the website has been carefully designed to convey information about services the credit union offers.

Ellen Garnett Kladky
Ellen Garnett Kladky
PhD Candidate
University of California, Irvine
Wesley Sweger
Wesley Sweger
JD Candidate
University of California, Irvine School of Law

Communicating through physical branch design

Now think about a similar question: what is the first thing that visitors see as they approach a branch location? Mirrored glass windows? A sprawling parking lot? The credit union’s logo on an otherwise blank façade? One thing a visitor will rarely see when they approach a branch is information about the services offered there—the very thing featured most prominently online. It would be easy to walk past many branches, or even into them, without learning what products and services the credit union offers.

Credit union websites must compete with increasingly popular alternative financial technologies, so website designers put a premium on communicating services. Why don’t branch designs do the same? After all, physical branches are a key element to competing with banks and alternative financial services (AFS) providers such as payday lenders and check cashers. As more and more people opt to receive financial services online and physical transactions increasingly take place through ATMs and ITMs, some have heralded the eventual end of traditional branches. But even if this is true, the change likely represents a transformation, not elimination, of the physical branch. Members still prefer to visit branches for more complex transactions, or to get advice.

Physical branches are a key element to competing with banks and alternative financial services (AFS) providers such as payday lenders and check cashers.

While online banking continues to grow in importance, small, well-placed branches serve as crucial beachheads that ground credit unions in the communities they serve. The presence of a branch in a neighborhood can be a real asset, but it does little to enhance the credit union’s profile if non-members pass by without ever learning about the services offered inside.

As a part of UCI's Community Credit project in partnership with Filene Research Institute, we’ve been canvasing economically precarious areas of Orange County, California, mapping out banks, credit unions, payday lenders, check cashers, and financial advertisements of all kinds. We’ve gotten a street-level view of the financial landscape encountered by underserved Californians every day. Through this process, we’ve noticed a striking difference in appearance between credit union branches and the storefronts of AFS providers.

Credit union external branch designs tend to use muted colors, they are often in stand-alone buildings surrounded by large parking lots, and they typically have no information or advertising on their façade.
Payday lenders, on the other hand, tend to have colorful and busy storefronts, are culturally specific to the communities they serve, and offer lots of information about their services (of course, there are exceptions to these trends).

Lessons from AFS providers

Credit unions should look different from payday lenders, right? Members should know when they enter a branch that they are at a trustworthy institution that has their best interests at heart, not a predatory lender looking to charge the highest possible rate. This is true, but we’ve found that credit unions are under-using street-level design and advertising strategies, which happen to be the same ones that payday lenders use most effectively. These strategies are key to helping underserved, minoritized, and financially-struggling populations (a group that accounts for the majority of dollars spent on everyday financial services) find non-predatory financial services. When it comes to branch design, it is possible for credit unions to take some lessons from AFS providers while still communicating trust, security, and competency. While some of our observations above are specific to Southern California, these lessons can be applied to any region or community.

When it comes to branch design, it is possible for credit unions to take some lessons from AFS providers while still communicating trust, security, and competency.

The idea that credit unions can learn from payday lenders is also a theme in the work of Lisa Servon, a Filene Fellow who has argued that to grow membership and foster financial inclusion, credit union branches need to compete with brick-and-mortar AFS providers, such as payday lenders and check cashers. Servon has found that people who use AFS are often aware that they could receive similar services at traditional financial institutions for much lower prices. Some cannot meet minimum balance requirements elsewhere. Others find that AFS providers are more convenient, transparent, and welcoming. Servon found that these customers, particularly those in racially marginalized or other financially underserved communities, cited discomfort at and distrust in banks and credit unions. At payday lenders and the like, prices are transparent and clearly displayed, services are offered in a variety of languages, and the business feels more integrated in the community. Servon concludes that credit unions have much to learn from payday lenders if they want to both grow their membership by including previously un- or under-banked people and extend their service mission by providing affordable services that enhance financial well-being.

Four strategies to create inclusion and appeal

What can credit unions do at street level to compete with payday lenders while distinguishing their value proposition? We’ve identified four strategies that credit unions can use to create more inclusive and appealing branch façades.

  • Use windows, banners, and signs to advertise the services you offer.
    Payday lenders know that customers like to be able to see services and prices listed upfront. As Servon explains, signs with this information create a sense of transparency and trust. Customers want to know what they are getting and don’t want to feel that they will be stuck with hidden fees. Credit unions can use the same tactic, for example through something as simple as exterior signs that list popular products (loans, saving and checking accounts, credit cards, etc.). These signs don’t need to be detailed or explanatory, they can simply communicate that such services are available inside. These signs (and any others) should reflect all of the languages in which the branch offers services. Multilingual signs do more than simply advertise products to a larger audience. They also signal that the credit union is integrated into the community.
  • Use signage to differentiate your credit union from payday lenders and banks.
    The façade of a credit union can convey more than the services offered within—it can also differentiate the credit union from banks and payday lenders. Credit unions already aim to do this in branch design and branding. The primary aesthetic goal of branch design for most clients is to convey authenticity and community focus. But credit unions sometimes opt for design choices that are very subtle, focusing on understated, nonverbal details of brand identity rather than communication with words. Exterior signs can spell out unique benefits of credit union membership, like member ownership, financial well-being programs, personalized services and support, not-for-profit status, and community focus. For example, a branch’s front window might pair large signs featuring popular products with member testimonials about community and personal support.
  • Keep in mind the appearance of surrounding businesses.
    In our research, we’ve noticed that payday lenders tend to be visually similar to surrounding businesses. In the images above, for example, payday lenders use the bright colors and text-heavy designs that are common in their majority-Latino/a community. In this visual landscape, the blank, muted facades of local credit union branches stick out. Even though these credit unions are deeply involved in the local community (while the payday lenders are for-profit institutions that profit off the community’s financial precarity), these design choices can make members and potential members feel uncomfortable and out of place when visiting the credit union. For example, looking at a photo of a local credit union branch, one of our research participants noted, “that [branch] doesn’t look ‘safe.’ It looks like if they saw me walking across the parking lot from the bus stop, they would call the cops.” By using design elements that match local styles, credit unions can alleviate some of these fears. And they can do so while still conveying professionalism and security. They can follow the lead of local professional businesses like doctors’ and lawyers’ offices, which mix these visual techniques with more staid design choices to communicate both inclusion and expertise.
  • Use design elements that reflect your membership—really!
    The exterior of a branch can signal to passersby that the credit union is a part of the local community—or not. Many credit unions rely on detailed target member profiles, which they use to guide everything from product design to branding. A branch’s design and appearance should also reflect the identities, lifestyles, and demographics of the members it serves. The branch design process enthusiastic about creating a branch that visually mirrors the identities, lifestyles, and demographics of their membership, in practice this effort is hampered by a desire to appeal to everyone. In the end, credit unions often opt for a more nondescript, “vanilla” look. But this aesthetic is not neutral, and indeed it may be off-putting to some (as it was for the research participant quoted above). Instead of defaulting to a generic look, credit unions shouldn’t be afraid to make bold design choices that reflect the membership served by a given branch, such as a mural by a local artist. Again, another way to reflect the identity of your membership is to ensure that exterior signs use all the languages in which the branch offers services. For credit unions with multilingual memberships, this does more than simply advertise products to a larger audience; it signals that the credit union is well-attuned to its members. A physical branch is a much more effective billboard if it communicates at a glance the credit union’s embeddedness and dedication to the community.

These are small changes, but they can make a big difference to how welcoming your branch feels to members and potential members. Of course, efforts to promote financial inclusion and compete with AFS providers can extend far beyond the branch façade. Unfortunately, the problem is not likely to go away any time soon. Financial instability is on the rise, and this means that more and more consumers are vulnerable to payday lending and other predatory services.

In our research, we focused on neighborhoods with a low Family Financial Stability Index (FFSI) score, developed by Parsons Consulting. FFSI is a much more detailed measure of precarity than income alone. It accounts for myriad other factors that go into a household’s financial stability, like steadiness of work, access to insurance, and the proportion of income spent on housing. We found that payday lenders were present not only in low-income neighborhoods, but also in medium-income areas that face growing financial instability. Indeed, research shows that financial precarity (the circumstance that causes people to seek payday loans) is a growing problem for the middle class. Addressing this problem will serve populations that have historically been excluded from financial services, and it will also create resources for a newly-precarious middle class.