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Credit unions, banks balance brand impacts while streamlining branch designs


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Credit unions, banks balance brand impacts while streamlining branch designs

Differentinstitutions face different challenges in modernizing their branches. While onecredit union is expanding and reworking its image with its new branchstructure, an established community bank is weighing the importance of itsbrand in its new approach.

President and CEO Christopher George said theWashington, Pa.-based organization will be expanding its footprint north into thePittsburgh area in early 2017. George would not say specifically where the newbranch will be located, but he left no doubt that it would feature the samesmaller footprint and modern interior design as the credit union's two existingbranches.

Chromehas zero interest in constructing 3,000-square-foot branches or includingfeatures like traditional teller lines in anything it builds going forward.Instead, the company believes 1,800 to 2,000 square feet is ideal to installwhat George called a "digital atmosphere" similar to what innovativeretailers including Starbucks and Apple are offering.

Georgesaid the organization took a hard look at itself a couple of years ago andrealized that it operates in a commodity market, and in order to differentiateitself it had to think outside the box. "Let's face it: You can take yourhand and put it over the name of any credit union because they all offer thesame stuff," he said. "It's checking, savings, CDs, auto loans and acredit card."

Sothe company changed itsname, found a consultant and explained that it wanted a place tooffer conversations instead of transactions. "We said, 'We're a retailcompany, ignore the fact that we're a credit union,'" George said. Chrome considersitself a tech company that provides financial products and services through acredit union charter and needed branches to reflect that philosophy. Georgebelieves ATMs and drive-thrus will be gone from the banking landscape in fiveto 10 years, so they were eliminated from the new configuration. There are noteller lines but instead a "transaction bar" featuring a cashrecycler that will process a member's check while an employee talks to themabout digital options that will help cut down on branch visits.

SNL Image

Chrome FCU branch lobby
Source: Chrome Federal Credit Union

Butobviously, smaller, sleeker branch designs are not exclusive to credit unions.Many community banks are making design changes, too. Warrenton, Va.-basedFauquier Bankopened its two newest branches in 2014, and both are smaller and more modernthan the bank's other nine branches. They were designed with less of a focus ontransactions and more on customer engagement, said Mark Debes, senior vicepresident of retail banking and marketing. The branches have an open lobbydesign without teller lines to create an "open, welcomingenvironment," which makes customer interaction more personal.

Thebank wanted to see the results of the new sites before it consideredretrofitting any existing branches and will probably take a look at redesigningsome locations starting in 2017. Debes said one of the problems with suchprojects is that the bank owns eight of the 11 buildings. "So we cancertainly retrofit the building, but there's really no advantage," hesaid. "We're not going to knock the building down to build a smallerone." Some space in a larger branch or two could be redeployed, but thebank will not try to downsize externally just to fit its modern model, he said.

Butanything Fauquier builds in the future will feature the newer, smaller design.Debes said that while many in the industry are suggesting new branches will bebetween 1,400 square feet and 1,600 square feet, he prefers a space closer to2,000 square feet. "It really doesn't cost that much to build that muchlarger of a facility," he said. "Because when we're building astand-alone, I also want to have some street presence."

Hesaid the bank has one branch that is about 2,400 square feet, which makes itvisible when drivers go by. He joked that he worries about building branchesthat look too much like the old Fotomat drive-thru booths. A site that is toosmall would not give the bank much opportunity to push the brand. He said 1,600square feet is large enough for a functional branch but adding another 600 alsoallows for a marketing statement.

Debessaid one big change in the new design is that branches were traditionally builtwith safety and security at the forefront, whereas now the focus is onconvenience. Research shows that banks with "pod" configurations arenot more likely to be robbed than those with teller lines, he said.

Itis yet unclear if millennials prefer the new design more than older customers,although the few complaints the bank has received about the new look have comefrom the latter, Debes said. Reaction to the new design thus far has beenpositive, mainly because it is more customer-focused. "I'll admit at firstthey walked in and were not 100% certain what to do," he said. "Butas they've gotten used to it I think they've found they really like the model."

Thebank will almost certainly be expanding its footprint in coming years, althoughit has a new CEO whomay have some ideas of his own on branching, Debes said. But anything built inthe future will be under the new design. He said it is interesting that banksare using new technology to find ways to keep customers out of the branches."Yet we're supposed to be a retail establishment," he said. "Ithink the branches still have a purpose, but it's going to become less and lesstransactional and more and more sales- and service-oriented. I don't think thebranch is dying, I just think its role is changing"

Chrome'sGeorge said the company expected a 10% to 15% member loss after the branchdesign change but have found only a couple hundred out of its 12,000 membershave left. About 25% of its members are of retirement age. He said even most memberswho complained after the change have stuck around. One older member sent thecredit union a two-page letter that said the new image had nothing to do withthe original intent of the credit union, but for the most part it has beenquiet. "Everybody was waiting for some wave of problems, but it nevercame," he said.

AlthoughChrome believes the vast majority of transactions will eventually be handledthrough its digital offerings, major transactions still need a human touch. ButGeorge said the primary functions of the branches are to serve as a place tohave a conversation and as a billboard for the credit union. "We believein helping people," he said. "We just don't believe in theold-fashioned model."