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A Few Questions To Consider Regarding Branch Strategy

May 31, 2012

What is your credit union’s long-term branching strategy?  That might be a tough question to answer for many institutions.  As margins have decreased, many credit unions have had to take a long and hard look at the effectiveness and profitability of their branch network.  While the bulk of new memberships, loans and deposits originate in branches, many institutions have considered shifting toward a model more geared toward e-services.  There are a multitude of questions that could be considered with respect to credit union branching, a few of which are outlined below:

  • How does the branch strategy align with the overall strategic direction of the credit union?
  • Can your institution afford to operate one or more branches that consistently have a negative overall contribution to the credit union?
  • Are branch location decisions based on where your current members live, or where members of your desired target market live?  Answering this question could lead to different decision-making regarding where to position future branch locations
  • Does your institution have the technology to allow for reduced member reliance on branch locations?  If not, how quickly are your technology offerings improving, and at what cost in terms of dollars and resources?
  • What might be the unintended consequences of your branching decisions?
  • How does the credit union measure branch success?
  • If the credit union is moving toward a model that relies less on physical locations, how will your organization effectively cross sell to members or prospective members?
  • Does the strategy fit with the financial realities your organization is facing now, or could face in the next 3 to 4 years, especially if rates remain low and loan demand is slack?
Continued margin pressure is likely to increase the importance and timeliness of these types of decisions.  Meanwhile, members are increasingly asking for more from their financial institutions which makes this a tricky balancing act.

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