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Millennials do shun branches, but not absolutely

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Millennials do shun branches, but not absolutely

The popularnarrative in banking today that millennialsare demanding a shift away from brick-and-mortar branches and toward more digitalchannels is not wrong but may not tell the whole story.

senior vice president and chief experience officer, Tony Cortez, for one, said thecredit union sees "a lot" of foot traffic from that age group, particularlyas those younger members seek out guidance and advice because they are not familiarwith some financial products or the processes. Millennials will typically do a goodamount of research online before going to the branch but if they are new to a productthey want the in-branch interaction. "They want that face-to-face," hesaid.

Of the13,750 millennial members at San Jose, Calif.-based Meriwest, 6,500 have indicatedto the credit union that branches are their preferred channel and visit at leastonce a month, while 4,900 millennial members list online as their preferred wayto interact with the credit union.

During the CO-OP Financial Services Think 16 event thisweek in Coronado, Calif., Salt Lake City-based Deseret First Federal Credit Union President and CEO ShaneLondon said the credit union recently opened a small branch near Brigham Young University.He said he has been amazed how many millennials have visited the branch to conducttransactions.

London said he has found that millennials are willing to purchasemortgages and other large products over the phone but want to have a branch nearbyin case they have questions. "They're nervous," he said. "They don'tknow what they're doing. They just want someone that they can feel comfortable withbecause it's new stuff for them."

London added, though, that the younger segment is still one ofthe top adapters of the organization's mobile offerings.

BatonRouge, La.-based Pelican State CreditUnion President and CEO Jeffrey Conrad said in an interview that millennialsare going into branches for things including auto loans and home loans. Those transactionsare larger and more complex, and most of the time the millennials are making theseloans for the first time without assistance from parents, he said. Millennials oftengo to the branches to get first-hand coaching through the process from the staffas much of their day-to-day banking is conducted via mobile devices. "So, theydo visit branches; however, it is significantly less than older generations,"he said.

U.S.credit unions closed 89branches while opening 82 during the first three months of 2016. As of March 31,there were 21,161 credit union branches in the U.S., up 23 from a year earlier.By comparison, banks and thrifts closed 500 branches and opened 211 in the firstquarter of 2016.

Thefuture of brick-and-mortar branches has been debated across the industry for years.At American Banker's Retail Banking Conferencerecently in Las Vegas, David Mooney, president and CEO of Chicago-based remarked thatoutdated thinking continues to pervade the industry as some credit unions seem intenton finding ways to justify their branchcount. "Are we protecting something that shouldn't be protected?"he said.

Cortez from Meriwest said the credit union will build more branches in the nextcouple of years but that the footprint of the individual branch is changing. "We'renot opening these big 3,000 square-foot branches anymore," he said. The newbranches in coming years will be a little more strategic and will be added slowly.Meriwest will primarily be going back in filling in the gaps where it has membersbut may not have enough of physical presence.

But strikinga balance between digital offerings and building more locations can be tricky. Cortezsaid that once young customers are brought on board, many migrate to electronicchannels because they find that they do not need the branches as often. They maystill visit occasionally when they need more in-depth discussions, more informationor if they are going for a larger transaction such as a mortgage. "A lot oftimes they may do the application online but when you are getting into the meatof the process that's when face-to-face is a much greater advantage to them,"he said.

Meriwestin July 2015 held a grand openingfor its newest financial center in Santa Clara, Calif. Cortez said that, if nothingelse, branches help to establish a brand presence in a neighborhood, the importanceof which cannot be understated, he said. But much of the credit union's marketingis cross-channel, so the message is relayed the same in the branches and throughthe mobile offerings.

New branchlocations aim to strike a balance between satisfying the need of existing membersand attracting new members. Cortez said the needs of existing members are alwayscritical while, at the same time, the credit union wants to find spots that presentopportunities for new members. Also, self-service capabilities in the existing branchesand new branches will move away from the "old-school" teller lines andinstead feature a more inviting configuration, he said.

But smallerbranches will not necessarily mean smaller branch staffs for Meriwest. Cortez saidthe credit union has always kept staffing "pretty lean." The credit unionis focused on creating full-service branches with mortgage representatives, wealthadvisers sharing space with the tellers.

At theend of the day, location is always second when it comes to why consumers pick abank. Recommendations from friend and family remain the primary reason. "Referralsare still our No. 1 source," Cortez said.