Executive Summary
Here’s a mental exercise. Run through the list of technology-aided transactions a member can make without an in-person branch interaction: deposits through ACH, an ATM, or a smartphone camera; withdrawals at an ATM or point-of-sale; account transfers through a call center or a home computer; loan applications on a cell phone or right in home banking. The list is long and getting longer as consumers’ access to cheap hardware abets their desire to manage transactions on their own time and on their own terms. While some of these behaviors only work for early adopters doing business with tech-forward financial institutions, many, like ATM deposits and call center loan applications, have become thoroughly mainstream.
It will be increasingly hard to justify building and staffing branches in traditional ways without strategic thinking on how to drive down branch costs or drive up branch-dependent revenue. This Filene brief examines the underlying cost structure in using the branch and uses real-word cost calculations to encourage readers to control branch staffing costs and drive more of their business to affordable delivery channels.
What is the research about?
This brief is the third in a four-part series that identifies and quantifies cost items at credit unions. The series does more than just identify the costs, however; it suggests measured approaches for minimizing costs by making informed decisions. The other briefs include treatment of item processing efficiency, balancing service with efficiency, and optimizing delivery channels. These reports provide specific cost metrics based on analysis from real credit unions and offer suggestions for how to align the costs you do incur with your organization’s strategy.
Credit unions should have a firm grasp on their costs, but detailed cost analysis is not always easy to do. This brief ’s primary purpose is to point the way for credit unions that would like to analyze their own offerings and to offer benchmark numbers to credit unions without the resources to do their own detailed cost analysis. Thus, the data given are directionally useful, even if the credit unions cited differ from yours in size.
What are the credit union implications?
When branch transactions are fully burdened, the cost discrepancy between branch and remote delivery becomes apparent, and the magnitude is impressive. Joseph Prunty’s analysis of one $1 billion credit union shows that all common transactions are significantly more burdensome through a branch. Opening a savings account at a branch costs three times as much as opening a savings account at a call center, a consumer secured loan at a branch costs two times as much as a loan at a call center, a checking deposit at a branch costs four times as much as a deposit at an ATM, a credit card payment at a branch costs two times as much as a payment at a call center, and a checking withdrawal at a branch costs seven times as much as a withdrawal from an ATM.
This report should be read as a critique of the urge to drive transactions to the branch when they can be better conducted elsewhere. Moving the members with a low profitability profile toward channels that will improve their profitability profile will better serve all members, who expect the credit union to grow and thrive.
This report is sponsored by Fiserv. Inc.Â