Is Now the Time To Buy Branches on the Cheap?


By Robert McGarvey


Soon you will be faced with a tough question: do you want to buy a new branch on the cheap?

Credit unions, traditionally, have run lean when it comes to branches.  Billion dollar institutions often have perhaps a dozen branches.  The biggest credit union branch networks are under 300.

But now a temptation to expand looms: big banks are hurriedly pruning branches and, by some counts, 20% of bank branches will close by 2020.

Wells Fargo for instance has announced closures of 400 branches.  Bank of America,  Citigroup, and Chase have also been busy closing branches.  Branch closures are a long-term trend.

That’s the temptation—it might even be satisfying to some credit union executives to snap up a failed bank branch for pennies.  The question is: is this wise?

This is the other question: Hasn’t technology moved us beyond branches?

Not so fast.

Technology—particularly in online and mobile banking—has transformed how we conduct many kinds of transactions.  But that does not mean good, old-fashioned analog, in-person banking is dead.

Listen to Levar Haffoney, a principal with Manhattan investment firm Fayohne Advisors: “Credit unions should take over abandoned bank branches. Many abandoned branches are in underbanked communities. Many of these communities have strong middle class demographics. There are numerous opportunities for credit unions to offer mortgages and other services to these communities.”

That’s right. Some say that branches—selling at today’s distressed prices—may be just the right bargain for credit unions that want to raise their visibility.

Nevertheless there are concerns to mull, a darker side of the balance sheet. Running a branch isn’t free. Ed O’Brien of Mercator Advisory Group has said it costs $200,000 to $400,000 to operate a branch.

Beat back the risks, and there are rewards. A profitable branch churns out money—a typical profit will be about $1 million annually but that will take 10 years to reach, Chase executives told Fortune.

And obviously—given the literally thousands of branch closings in recent years—many bankers have lost patience waiting to yield profits and have pulled the plug.

But then there are other, more positive statistics to mull.  A late 2016 report issued by software company Timetrade disclosed tantalizing factoids such as that 62% of credit union members prefer to visit their credit union in person; 43% visit more than 10 times per year; and three-quarters of credit union members count as “frequent branch visitors,” per this research.

These numbers tell us a significant percentage of credit union members value the experience they have at their local branch.

Yet data also suggests that—increasingly—consumers know they do not have to visit a branch to accomplish the routine banking chores that used to bring them in.  For instance: every deposit made by snapping a photo of a check with a Smartphone is one fewer trip to a branch.

The list goes on. Consumers have been switching into digital solutions for banking transactions and that has eroded branch visits.

That’s an undeniable push-pull.

But just maybe that debate about technology’s role is not in fact the decisive factor that is prompting so many branches to close.

Note, too, according to FMSI, the number of branches in the US increased by about 300% from 1070 to 2014. And yet the US population, said FMSI, increased about half that rate. That resulted in what FMSI called the over-branching of America, where many financial institutions – often for reasons due to marketing and egoism, more than genuine consumer need – spent aggressively to put up new branches.

So what does all this mean in terms of acquiring closed bank branches – very possibly on the cheap?

It depends, multiple experts insisted. Smart decisions will be made on the basis of in-depth analysis of local factors.  The national trends matter but what really matters in deciding to add a branch are a lot of local data points.

When a new location represents a rational extension of a credit union’s marketing footprint, it just may be a sweet opportunity.

But when a new branch will cannibalize the dwindling traffic of an existing nearby branch, the acquisition makes no sense.

There is no surefire metric, no quick barometer that says stop or go.  Real market research is required, along with proceeding with eyes wide open to the risks and possible rewards.

That’s the bedrock of a smart branch acquisition strategy.

But just maybe now is exactly the time to begin doing that analysis.  There probably never again will be so many branches available on the cheap.
















Mansel’s Motivational Monday


“Back in 2004, Sylvester Croom became the first African American head coach in the Southeastern Conference (SEC).  He was hired by my alma mater, Mississippi State.  When Coach Croom talked about his journey to becoming a head coach, he would talk about being passed over by other schools, including his alma mater, Alabama.  But he was not a bitter man.  When he was finally hired to be the head coach at Mississippi State, he said this; “It is better to be prepared for something that never happens than to be unprepared for something that does.”  Regardless of whether or not anyone would ever give him the chance, Coach Croom spent his career preparing.  And while his five years at Mississippi State may not have been an overwhelming success, his words spoke, and still speak volumes to me.  If we have a dream, if we have a vision, we should live every day in preparation for that vision to become a reality.  Regardless of whether you aspire to be the king of the world or to simply lead a small group of people, live like you are already there.  Then, you’ll know how to act if or when your dream comes true.” 

The Big Credit Union Edge That’s Almost a Secret


By Robert McGarvey


The nearest branch of my credit union is 2,400 miles to the east, meaning it is on the other side of the country. But you know what?—I get the services I need regardless of the physical separation, thanks to advantages that give credit unions an edge over big banks—advantages that are almost industry secrets.

That they are almost a secret, particularly to consumers, should bother you. It’s an opportunity squandered, in my opinion.

When I look at any article that sums up the top reasons consumers cite for not joining a credit union, on the list—just about every time—is the claim that credit unions do not have enough branches, joined by the worry that there are no nearby ATMs and, definitely, the typical credit union does not have enough ATMs. So consumers seem to believe.

Pretty much universally.

How can that be?

What’s especially sad about the outcome—where many people feel credit unions couldn’t work for them—is that for most consumers a credit union will be a better deal. The 2016 Bankrate survey said 76% of credit unions offer free checking, up from 72% in 2015—but misconceptions are keeping those potential members away.

Look at ATM access and know that the numbers don’t lie. Many credit unions not only offer free checking, with no minimum balance, but they also have more ATMs available to members with no surcharges.

Another Bankrate data dump pinpointed the largest bank owned ATM fleets and, in sixth, with 4775, is BMO Harris.  Fifth is US Bancorp with 5001.  Fourth is PNC with 8996.  Third is Wells Fargo with 12800. Second is Bank of America with 16062. The top spot belongs to Chase, with 18623.

No single credit union has an ATM fleet that belongs on that list, not even close. But it doesn’t matter because credit unions have a powerful edge that changes the game. They work together to help their members.

The CO-OP ATM fleet numbers about 30,000, according to that CUSO.

The CULIANCE surcharge free network, by its count, has three times as many surcharge free ATMs than the biggest bank. It also has more than CO-OP.

Belong to a credit union that participates in one of those networks and just about wherever you go there is a surcharge-free ATM.  There are maybe six surcharge-free ATMs within a mile or two of where I live in Phoenix, for instance.

The deal offered by the big banks gets rawer.  Use a non-network ATM when you are a Chase customer and you will be charged $2.50 by Chase, plus whatever fee the ATM owner imposes. Ditto for Bank of America customers.

Who has more convenience? Not the Chase customer.

What about deposits? Easy: Mobile Remote Deposit Capture.  If you can take a picture with a smartphone, you can use MRDC to instantly deposit into an institution cross country. I use it frequently.

Or use surcharge-free deposit taking ATMs.  There’s one a half-mile from my home. That network, too, is another credit union edge.

There are also two shared branching locations at credit unions within a mile of me. It’s a service I have never used—I’m a fan of digital banking—but for those who want personal, face-to-face interactions with tellers, it’s available to credit union members, pretty much anywhere in the US. That’s a third big edge.

You know all this. Why don’t more consumers?

Here’s the money question: why do so many people say they would join a credit union, citing a lack of nearby branches or ATMs as their only impediment, when this this impediment doesn’t actually exist?

With the networks available to credit union members—networks that leverage the co-operative fundamentals of every credit union—a member who belongs to one of the tiniest credit unions can have ready access to a massive and global ATM network, plus shared branching for those who want it.

Not all credit unions belong to these networks, but well over half do.

Not every member needs network access and for those who live or work near an ATM or branch and don’t travel that much, it won’t matter.

For those who live a mobile lifestyle—and especially for those who live at some distance from their credit union—join a credit union that belongs to larger networks and the services are the equal of a giant bank’s.

Yet that is not widely understood, and this is a pity.

Why has there been so much silence about these powerful credit union advantages?

Of course some credit unions are more comfortable selling themselves—not the broader concept of credit unions. But listen up: the way to supercharge the credit union pitch is precisely to double down on the credit union story of cooperation and how, with many joining together, each gets stronger.

That’s how to get across the message that, together, any credit union is bigger than the biggest bank.  Bigger and also better.



It’s tax season. Is your credit union prepared?


Tax season is upon us and that means you may already be seeing an increase in your  ATM withdrawals.  H & R Block, Jackson Hewitt and other tax preparation services are teaming up with American Express and other prepaid card issuers to offer faster tax refunds by loading funds directly onto prepaid debit cards – a practice that has become very popular.

In recent years, CU24 has seen an increase in foreign ATM activity due to these prepaid debit card withdrawals.  Here are some considerations for your credit union as these cards begin to reach the market:

  • If your ATM is located in the same plaza or near a tax preparation service company, you will experience an increase in ATM withdrawals.
  • These ATM withdrawals will be considerably larger than typical withdrawal patterns.  For example, you may see several $800 withdrawals from the same card. Many of these cardholders may want to withdraw all of the funds on the card immediately.

CU24 recommends the following:

  • If your ATM is located near a tax preparation service company, increase ATM cash loads during the tax season.
  • Lower the maximum foreign ATM withdrawal amount to $200; this will help increase your ATM interchange revenue. This is a good practice, whether during tax season or anytime.
  • Plan for this increased activity on an annual basis.  Tax refunds on prepaid debit cards is increasing every year. If your ATM was impacted in 2016, you may already be seeing withdrawal volume increases this year.
  • Contact your cash delivery service and inform them of the potential need for additional cash loads. This could help reduce delivery delays.

Although some of these prepaid cardholders will seek out surcharge free ATMs, the selection of an ATM for these cardholders is largely driven by location.  These prepaid debit cardholders are more likely to access the ATM nearest the tax preparation service company, even if that ATM has a surcharge.

Mobile Payments: How to Be Ready to Win


By Robert McGarvey

Buckle up and enjoy the ride. That’s the central advice from mobile payments gurus, who foresee substantial upheavals in that world.

That also means there will be opportunities for alert credit unions.

A reality: we are not quite three years into the mobile payments revolutions, meaning this is early days, Apple Pay currently has a substantial lead over second-place Android Pay, which has a lead over Samsung Pay—but in the mix are many more payments technologies such as PayPal. While some consider Apple the clear leader, others are more circumspect.  “No real leader has emerged,” said Paul Fiore, CEO of CUSO CU Wallet, a digital wallet.

Mobile payments remains an area of active combat.

Another reality: consumer adoption of mobile payments has disappointed many (“anemic” is the most most commonly used descriptor), but huge growth lies ahead. Researchers at Forrester say mobile payments will hit $282 billion by 2021.

Globally, Allied Market Research has predicted that mobile payments will reach $3.4 trillion by 2022.

Meanwhile retailers have been rushing to accept mobile payments.  Boston Retail Partners reported that 36% of US merchants now accept Apple Pay, up from 16% in 2016.  Another 22% of retailers said they plan to accept it within the next year. Furthermore, most retailers who accept Apple Pay may also accept Android Pay, which runs over the same NFC pipe.

These numbers mean we are rapidly reaching a point where the majority of retailers accept mobile payments and that is a kind of tipping point.

So, yes, so far consumer usage of mobile payments has lagged expectations, but most experts believe that their usage will steadily grow, if only because—for many of us—phones are increasingly integral to our lives. We are using smartphones to do almost everything, so why not use them to pay, too?

The holdup so far in consumer usage, said James Wester, research director, global payments, IDC Financial Insights, is that consumers still don’t quite see what the advantage for them is in using mobile payments.

But, little by little, consumer usage is growing and the trend is clear.

Which raises a crucial question: what does a credit union need to do to keep pace with the shifting sands of mobile payments?

A big prediction from Wester is that probably many more entrants will launch mobile payments apps, and these will include both retailers and financial institutions.

Read that again. He is saying that financial institutions may well directly enter mobile payments, which might mean both revenue and enhanced member loyalties to the credit unions that take the plunge.

Wester’s point: most retailers are enviously eyeing Starbucks’ success in mobile payments (by most yardsticks it is the most successful app), and they are beginning to deploy their own tools.  He pointed to Target (Target Pay) and Walmart (Walmart Pay) as cases in point. The latter is already rolled out; the former is said to likely go live in mid 2017.

Many more retailers will likely follow as they seek to own more of the consumer’s shopping experience and to reduce fees paid to third parties such as Apple.

But, for credit union executives, the more exciting development, per Wester, may be the emergence of mobile payments as a tool inside mobile banking apps.

A for instance already on the market—although it now is a standalone app—is Chase Pay, which, according to Fiore, is “an app you want to pay attention to. They have a winning approach.”

Other institutions will follow.

Wester argues that consumers already have close relationships with their financial institution’s mobile app—many use it daily; some use it multiple times a day. Notably, many already consult a mobile banking app from retail locations in deciding what tools to use for making a payment.

From there, it would be an easy step for the consumer to pay with a tap on the mobile banking app itself.

Here’s your to-do, according to multiple experts: start discussions with mobile app experts and payments processors about the how-to of integrating mobile payments directly into the app.

By all means, continue offering Apple Pay, Android Pay, and Samsung Pay, but be prepared to go direct, too.

The biggest institutions will be doing exactly this, but this is a space where fleet-footed credit unions may be able to get a jump.