As credit unions work on their strategic plans for 2016 and beyond, many say they are focusing on infrastructure, but they are widening the definition to include more than just physical assets.
At Baton Rouge-based Neighbors FCU, SVP of retail operations Greg Inman explained the $732 million credit union is looking into how it should tackle future branching needs — a project it plans to start later this fall after a core conversion is completed and a new CEO is appointed in October.
"Transactions are declining even as membership numbers grow; members are visiting branches less and less, so the model of the branch of the future — what does that need to look like for us?" he asked.
Neighbors currently operates 10 branches and two high school locations. One of the challenges for 2016 and beyond will be determining whether to build new branches or remodel existing ones.
"Most of our branches are large facilities, and we've got a lot of costs built up in those physical assets, so it's very expensive," said Inman, who is also vice chair of the CUNA OpSS Council. "We recognize that their role is changing in the future, so it's causing us to reevaluate human resources, what positions are vital in branches [and] do branches need to be the same size as now."
Inman added, however, that with all of the changes coming as a result of the core conversion, NFCU is also wary of changing too much too quickly.
One CU moving full steam ahead with branch expansion is O'Fallon, Mo.-based West Community CU, where SVP/CFO Jason Peach said the institution is in year two of a three-year plan created as a result of last year's strategic planning sessions.
"The ultimate objective by 2017 is to be prepared to expand our branch network," he said, noting the $167 million CU plans to expand from four to six branches. "Few credit unions are [expanding branch networks] at our size because it is so expensive and material to the operations and the budget, so we really have to get prepared for it. There are a number of initiatives we're doing this year and next to make sure we have expenses under control, revenue where it needs to be and that we're innovating our processes and approaches to make sure we maximize the success of expanding our footprint."
Peach said while members want convenience and self-service channels, "the branch is still the highest acquisition point." So even though West Community is building new branches, those facilities won't look anything like traditional branches.
"We recognize that after acquisition, 70% of members or more will not regularly use that branch again," he said, noting that members will mostly opt to contact the CU through its call center, online or mobile channels. Branches don't see enough volume to make the old-school teller line efficient, so WCCU is exploring ways to use mobile banking functionalities so that MSRs can assist with sales and service issues rather than just providing transactional services.
"There's no cookie-cutter recipe as there might have been with building a branch in the past," said Peach.
Digital Infrastructure
For Suzanne Weinstein, CFO at Orlando FCU and chair of the CUNA CFO Council, her institution's strategic planning sessions will involve looking at the CU's demographics today and how member use various products and service channels, and then trying to forecast how those will be used in the next five or 10 years to make sure the infrastructure is in place to meet those needs.
Weinstein advised CUs to look at their member demographics as part of their strategic planning, but also recommended using ACH files as a resource. She called those records "a great repository of information" because credit unions can see shifts in the way members pay their bills. "The challenge is getting a system in place to extract that data so it's not so labor intensive."
But how accurately can CUs really predict the way technology will change? Jeff Johnson, SVP of IT at Vernon Hills, Ill.-based Baxter CU and a member of the CUNA Technology Council's executive committee, noted while it can be difficult to make specific predictions, "you know where the trends are going to go."
"I'm pretty confident that five years from now there will be more IP-connected devices that members will want to see their financial information on," Johnson said. "A watch or a car or a refrigerator or God only knows what. I'm pretty confident that it will become more ubiquitous." Not only will member data almost certainly grow at an exponential rate, he said, but that will be fueled by growing bandwidth across mobile devices and drops in the price of smartphones, making them even more affordable to lower-income consumers.
Part of Baxter's strategic planning, said Johnson, involves doing as much as possible to put "everything we can up into the cloud to leverage innovation and speed to market that's happening up there."
One example of BCU's embrace of the cloud was converting to Office 365 in 2013, which he said has enabled the CU to regularly update features that improve security for its network and data — something that would've been very hard to do internally.
Baxter said the movement hasn't been as proactive as it should with the cloud, and said that anything CUs can do to "get out of the infrastructure business" will benefit them in the long run. "To try to update all of the technology and infrastructure at [the current] rate of speed is going to be virtually impossible," he said. "So why not leverage the innovation happening in the cloud and ride those rails?"
While it could be argued the economy has improved enough to allow the luxury to focus on factors other than best practices for deepening member relationships, Inman pointed to another key factor. "It comes down to relevance," he said. "We're looking at it as how do we remain relevant — a key part of the community, a key part of top-of-mind awareness when it comes to people in our area thinking of doing something financial-services related. Do they think of us first or do they think of a bank?"
