Most bank and credit union CEOs agree that there will always be a need for branches, but it is unquestionable that foot traffic has decreased during the past several years – a trend that was only accelerated by the pandemic.

And that means that having a strong digital banking presence has never been more important.

“You need an excellent mobile experience to lead with, while maintaining the ability to provide excellent service at the branch level,” Greg Kidwell, president of Pathways Financial Credit Union, a $630 million-asset lender in Columbus, Ohio, told Tyfone. “But in terms of recent investments, mobile is where the investment has gone.”

Glenn Grau, senior vice president of sales for the Pittsburgh-based branch design company PWCampbell, said there is definitely a strong move toward marrying technology with the physical environment.

Achieving the right balance between the two in order to efficiently and effectively serve members is key, Grau told Tyfone.

“We are still busy with projects, there are still a lot of renovations and updating branches and also new locations for growth,” he said. “We are also doing a lot of operations centers.”

Credit Unions have been adding branches while their bank counterparts have not.

In 2009, the last year that physical locations increased for banks, there were nearly 100,000 branches across the U.S. There are fewer than 80,000 today, according to S&P Global Market Intelligence data.

But credit unions in some cases have looked to fill in banking deserts. For example, the $1.5 billion-asset Great Lakes Credit Union recently announced plans to open a branch in Chicago’s Austin neighborhood, which has long been considered in need of a financial services provider.

The reduction in branch counts by banks has been primarily to eliminate redundancies, less so to exit markets unless it involved a non-viable market, said Bill Handel, chief economist for Fiserv.

For example, Fulton Bank, a subsidiary of Fulton Financial Corp., recently said it plans to close 13 branches in Pennsylvania and New Jersey by November 22 and consolidate their operations into nearby branches.

“You need an excellent mobile experience to lead with, while maintaining the ability to provide excellent service at the branch level. But in terms of recent investments, mobile is where the investment has gone.”

 – Greg Kidwell
President
Pathways Financial Credit Union

The move is part of the bank’s strategy and integration of assets acquired from buying Republic First Bank from the Federal Deposit Insurance Corp.

Handel told Tyfone credit unions, on the other hand, continue to add branches in low numbers as they seek to enter new markets. Among credit unions, the branch counts grow even as the number of credit unions continues to decline.

There were 4,604 federally insured credit unions as of Dec. 31, 2023, compared to 4,760 a year earlier.

“In regard to melding branches and digital, the intent is still present, but I have not seen anything that we would describe as earth-shatteringly new,” Handel said. “The most immediate gain can be had in ‘look and feel.’ with consistency across platforms. Second is likely in the area of merging the experience.”

Members 1st Federal Credit Union in Enola, Pennsylvania, has 60 branches including five it added in the past year as part of an expansion into Berks and Lehigh counties.

President and CEO Mike Wilson told Tyfone the credit union also added a branch through a deal with First Harvest Credit Union that will put Members 1st in Williamsport, Pennsylvania.

The $7.8 billion-asset credit union has more than 581,000 members. And Wilson said it is important to remember that there are five generations of consumers among that membership, and they all have preferences in terms of their favorite delivery channel.

He said the credit union tracks its branch traffic “religiously,” and one consistent finding is that the fear of fraud online is driving more in-person conversations.

Still, Wilson said the credit union will invest heavily in technology, including artificial intelligence.

“We are cautiously researching it,” he said of AI. “We’re not opposed, but you really have to vet this technology before you go all in.”

But regardless of the specific strategy, credit unions should be striving for growth, said Kirk Kordeleski, the former CEO of $13 billion-asset Bethpage Credit Union in New York.

Kordeleski retired from the credit union seven years ago and is now a partner at PARC Street Partners, a credit union consulting firm.

Growth for growth’s sake used to be a dirty term, but Kordeleski said the strategy is essential for credit unions today.

“You need to look at the business differently. Credit unions are overcapitalized and you should use capital to grow,” he said.

Bethpage, for example, has 465,000 members today, which is 96% more than it had 10 years ago.

But risk aversion is deeply seeded and problematic, Kordeleski said. Credit unions are so risk averse that they have slowed growth and are hesitant to make decisions.

“There’s a lack of urgency, and the ability to act quickly is crucial,” he said.