Why 1 Large State Employee CU Sees No Need To Branch
Pennsylvania State Employees CU has a lot of almost everything: 305,000 members in all 67 counties of the state, $2.5 billion in assets, 500 full-time employees and 220 ATMs. But what it has never done is build a single traditional branch.
"It really depends on how you define what a branch is," PSECU CEO Greg Smith told The Credit Union Journal. "We do have multiple facilities, but most of your readers wouldn't call any of them a branch."
The credit union's main office, for example, does have a teller line, but there's no cash. "If you define a branch as a place where there are tellers, then we have three of those, but they are cashless," he explained. "We also have 12 e-centers, which are on the campuses of 12 of the state's 15 college campuses."
But e-centers probably don't meet the definition of a traditional branch. Not only is there no cash at the e-centers, but there are no tellers, either.
PSECU hires several student interns to man each e-center, where their job is to sign up members and show them how to do business with the credit union either through the use of ATMs, kiosks, call centers or Internet banking.
"We do, actually, have one traditional branch," Smith conceded. "It's the facility of a credit union we merged with a couple of years ago, and we have kept it the way it was, with tellers and cash. If we'd built it ourselves, it wouldn't be a traditional branch. We may still eventually rework that branch to bring it in line with the rest of our operations, but in the meantime, for continuity's sake, we have left it as it was."
"We did a study once to see how many members had actually ever been in one of facilities. It was only about 9%. We have 305,000 members, and less than 10% have ever set foot in one of our facilities. I actually get letters from members saying things like, 'I've been a member for 10 years, and I have never been inside the credit union.'"
How does a billion-dollar credit union serving more than 300,000 members serve them all without a single "regular" branch?
"About 30 years ago, the board decided to follow a branchless strategy," Smith-who wasn't with the credit union at the time-related. "Our charter is essentially statewide. There are restrictions on it, but we have members in all 67 counties. So we have an enormous charter, and the board realized that if they tried to use the traditional branch delivery method, it would be very expensive and inefficient, so they set about establishing a system to serve members remotely."
So the credit union opened up call centers 25 years ago, decades before many of its CU brethren. "It wasn't a matter of great foresight, it was just the only way we could talk to a member without a branch," he explained.
Then along came the ATM, and suddenly PSECU had a whole new means of reaching out to members without opening a branch. Soon after came automated-response telephony systems, allowing for even greater access to members.
And then, of course, there was the Internet.
"With the Internet, members can basically serve themselves from their own homes," Smith offered.
Advances in technology-and a reversion to a seemingly antiquated "technology"-led PSECU to develop Upost
With UPost, members use regular mail to send checks to the credit union, and even before they lick the stamp, they can go online and post the deposits to their accounts-and be credited for those deposits immediately.
In the four years that UPost has been implemented, PSECU has processed 800,000 deposit sessions for a total of $400 million-and it's only written off $14,000, Smith noted.
"That's actually a lower loss-ratio than some credit unions experience over the counter," he added. "It's actually cheaper for us to process a UPost deposit than an ATM deposit."
According to Smith, a quick check of the NCUA Call Reports ratio page will show that PSECU's productivity, as measured by the number of members served by each employee, is almost twice that of its peer. "Our ratio is usually at about 610 or 620 members served per employee. Most of our peers are in the 300s," he observed.
To bolster its own remote services network, PSECU is a founding member of CU$, an ATM alliance that gives the CU's members surcharge-free access at 800 ATMs. Plus, members can make deposits at 3,000 ATMs through a deposit sharing network offered by STAR Network.
Moreover, PSECU provides a rebate at foreign ATMs to cover a portion of the surcharge.
While this system works well for PSECU, Smith concedes it's not for every credit union-particularly those with a traditional branch network already in place.
"It's very difficult to take things back," Smith offered. "Credit unions often come to me and say, 'I'd sure like to do that,' and I have to tell them honestly, I don't know that you can do that. It's hard to train your members to do business this way when they are already used to the branch system.
"One thing I have learned is that consumers think they need a place to go. The really do," he continued. "If there's a problem with one of their accounts, they want to know there's a physical place to go where they can talk with someone face-to-face and get the problem resolved."
PSECU's members, however, have been "taught" that if they have a problem, the credit union is always just a phone call or e-mail away-and more often than not, they can resolve the problem on their own just by going online, Smith suggested.
"There's really not a lot that a person would need to go to an office for," he advised. "With the cost of gas today, it's all the bigger of an advantage not to have to drive to the branch."