Navy to Expand Traditional Branches as Banks and Other CU’s Downsize and Minimize

July 02, 2014

As banks closed more than 1500 branch locations across the nation over the past 12 months, one credit union, the $58 billion Navy FCU plans to add 60 more offices to its extensive worldwide network by 2016.  The organization that serves close to five million members in over 220 locations will expand to a total of 307 offices around the world.  According to Jeanette Mack, manager of corporate communications, Vienna, Virginia, “In no way is the branch dead at Navy”.


In 2013, plans to grow credit unions through the expansion of further locations rose by nearly 650 percent over a four-year period.  According to the National Credit Union Administration, the independent governing agency that oversees credit unions in the U.S., the total number of collective customer facilities has risen to 20,221.


Mike King, VP of strategic planning at DEI, a design and build firm counts this as, “A dramatic increase…that really quantifies credit unions’ growing interest in branching.”  This is in sharp contrast to banks that have already closed more locations than they’ve opened in the first quarter this year according to SNL Financial, a company that disseminates data for the financial sector.  Luis Dopico, senior researcher at the Filine Research Institute, Madison, WI echoes that and points to the personal factor that impacts consumer choices in banking. "Many financial customers choose credit unions instead of commercial banks because they prefer customer services in person with employees they can see, know and trust, "he says.


And while many other credit unions may be looking to open smaller branches in the future, the Navy FCU plans to lead with traditional branch sizing.  Mack adds, “Size will simply be based on the situation at the time—the amount of available space, whether we are leasing or buying”.  Though some may be focused on adding more technology-based branches, the Navy continues to foster customer relationships in person.  As Mack puts it, “It’s a place for members to get education about financial services and products.  It’s a place for face-to-face contact, a place for members to get their first loans.  Surprisingly she adds that branches see many millennials using services, conducting transactions and opening accounts.  These are the relationships the Navy wants to build over time, as their consumer population ages. You can find more informaiton on Military and VA Loans at


Personal Teller Machines and Interactive Technology

Not every credit union shares the same philosophy about expansion as the leader—in fact, most don’t.  As plans to further grow business many credit unions are revaluating the type of facilities needed and the technology used to “man” these locations.  Some credit unions plan to install personal teller machines, (PTM’s) as they begin to open smaller, more technologically equipped branches for greater efficiency and an emphasis on online transactions.  The PTM allows the branch customer to interact with an off-site teller via video chat and use a high-tech ATM machine to conduct standard transactions.  As credit unions continue to expand, some like Jon Jeffreys, managing partner for Callahan & Associates, Washington predict that, “The death of the traditional branch will be real”.


Facilities are definitely shrinking and are more focused on becoming financial centers rather than transaction outlets according to Jeff Boehmer, Regional VP for DEI. "The actual retail space in the branch is getting smaller than it was five years ago,” he adds.  Some like Coastal Federal Credit Union in Raleigh, North Carolina are actively planning to expand their network, but in a far different way than the Navy.  The company has already cut its teller staff by 40 percent through the installation of PTM’s at each of its 16 locations.  The union will likely continue to open small consumer service centers equipped with PTM’s, one branch manger and one loan officer in the future.


The $2.3 billion company will likely continue expansion under this current branch model over the next five years according to Lauren Stranch, PR specialist for Coastal adding that,  "Members like the PTM’s.  In fact, they seem to forget how things used to be.  Members get quicker response time at the PTMs, lines move faster and we are opening more checking accounts as a result."


Virtual Technology—Solely Automated Branches

Some predict the fully automated branch that utilizes either PTM’s or virtual holographs for tellers is not far off.  After meeting with several credit union CEO’s recently, Jeffreys (Callahan and Associates) believes that a “personless branch” for credit unions that’s operational 24 hours a day, seven days a week could be open within two years.  In fact, JP Morgan Chase is already advertising a feature of one San Francisco branch of the bank that can be securely used around the clock even when the office is closed.


Richard Grow, owner and president of DEI says his company has already helped develop an unmanned bank kiosk, the Omni-Series that offers a virtual banking experience through holographic technology that is remarkably realistic.  Currently, the company has developed a prototype for the “telepresence branch” for supermarket locations that can be maintained by either one employee or none at all.  This includes technology that utilizes sensors that trigger the holograph to greet customers as they approach the kiosk for service.  


The Debate Over the Future of the Branch

Some aren’t sold on the immediate leap to replace human interaction with virtual technology however, like Kevin Blair, CEO and president of NewGround, a design/build company in St. Louis.  "There is still the need to have physical contact with the member. The further you push members away from this [face-to-face] model the greater the potential you may lose them." 


Blair points out that a multifaceted approach is needed when making decisions about branch expansion and the use of technology.  While some customers will ultimately prefer the virtual teller, there will still be those who will only be comfortable turning their money over to a human being.  It’s also possible to overinvest in technology that could quickly become obsolete with the use of cell phones and other applications he points out.


Managing director at Scottsdale’s Cornerstone Advisors believe that smaller credit unions may be forced to make major changes in their structures and expansion strategies as regulatory requirements continue to squeeze them to cut costs however.  "It's harder for smaller credit unions to keep up with the changing regulatory environment that is forcing more and more investments in people and software," he said.


Others like NewGround's Blair firmly believe that branches will continue their growth since he’s seen the predicted death [of the branch] come and go over his 35-year career.  "One of those times came with the dot-com boom and branch construction slowed in the late '90s with everyone saying banking was going online," he notes. "But then between 2000 to 2007 we saw an explosion of retail outlets."


Financial Management Solutions Incorporated, Alpharetta, GA who partners with financial institutions nationwide on efficiency solutions agrees that traditional consumer branches are here to stay.  "I believe most of our clients believe the branch is not dead," said COO Meredith Deen. "It just has to serve a different purpose and be designed in a way to serve that purpose. So maybe there has been a bit of inertia as credit unions try to figure out how they serve members in the most appropriate way."