Setting aside the smallest operations, there really isn't much anymore that a big bank can do that a credit union can't. Yes, banks can afford to throw more money at technology (which has evolved into something of a commodity now), can afford to make bigger mistakes (which come back to haunt them in the form of angry customers), and have the budgets for national TV buys (where they must compete with the Budweisers and General Motors).
The biggest remaining bank advantage is branches and convenience, the box-on-all-the-blocks strategy. So why, as we are five years into a new century, isn't every credit union branch a shared branch?
"Obviously, there have always been reasons why some credit unions have not been able to open shared branches," observed Sarah Canepa-Bang, president of Financial Service Centers Cooperative, Inc., San Dimas, Calif. "But as we are progressing we're finding many of those reasons going away."
Craig Beach, VP of marketing and business development for Credit Union Service Corp., Duluth, Ga., agrees. "The main reason, especially for smaller credit unions, has always been costs," he said. "But we've been able to lower that. Some small credit unions have used shared branches to grow and even help pay for new locations."
"If a credit union says that it's the dollars that are the problem, we can fix that," added Canepa-Bang, whose company's website notes its "mission" is that "every branch of every credit union is an outlet."
Beach said CUSC has been able to cut costs in part due to decreases in costs related to telecommunications and the technology behind its Next Generation Network.
But some old-fashioned road bumps remain. "One legitimate reason (more CUs don't participate) has been lack of parking, where credit unions don't even have enough parking for their own members," noted Canepa-Bang.
A less legitimate excuse, she said, is that the credit union has just one branch. She cited Allied Credit Union in California ($20 million) as a one-branch operation that "is doing a great job as an acquirer." (There are two types of shared branch participant: issuer and acquirer. An issuer credit union's members can use any branch in the network, for which the CU pays a fee per transaction. An acquirer's branch participates in the network, for which the CU is paid a fee for non-member transactions.) Canepa-Bang said FSCC has found that some members who belong to multiple CUs will do most of their business with the CU that's part of a shared branch network.
Beside costs, both Canepa-Bang and Beach responded similarly when asked what the biggest misconception of shared branching is.
"It used to be, and I would underscore that, that there was fear that 'My members will be stolen,' " said Canepa-Bang. "But they've come to understand that doesn't happen."
"The big misconception is that 'If I send my members there, the big credit union will steal them'," agreed Beach. "There are penalties in place and there have always been rules about poaching. What credit unions find out is that their competition is the community bank, not the other credit union."
Canepa-Bang said a bigger obstacle to shared branching often remains in the shadows. "One thing that's left unsaid is the reason credit unions don't do it is the additional work on the operations side," she said. "But if you set it up right, get your data processing aligned, and your people trained, a shared branch transaction takes no more time. There are some terrific operations staff out there."
But what about the issue of members who use a shared branch doing nothing more than a transaction, and little else? Canepa-Bang said the best answer to that is a CEO who told her, "When I cash a check for a non-member, I make money. When I cash a check for a member, I lose money."
"The underlying question from an issuing perspective is, 'Are they high-value members?'," she continued. "We have found the members who use the shared branch are high-deposit members. They average deposits of $1,000."
Shared branches are long past the point of curiosity or the regional phenomenon they were when they first took root in Michigan. FSCC, which operates the CU Service Centers network, has 1,500 locations in 42 states and seven countries. Canepa-Bang described the past few years as "monster growth," pointing to the 200 outlets that will open this year. She said her goal for 2005 is 250 new locations.
CU Service Corp. has more than 1,400 locations, including 672 shared outlets. It recently knock, knock, knocked on Ecuador with an agreement to help expand shared branching in that country.
"Shared branches used to be sold as allowing members to go everywhere," Canepa-Bang said. "That remains true, but now they're sold as allowing members to go anywhere, you get income, and you are part of the cooperative."
Frank J. Diekmann is editor of The Credit Union Journal.
