A decade ago channel strategy was largely branching strategy with call center support.The growth of online and now mobile banking has brought complex challenges: channel preferences vs. channel neutrality, resource allocation, marketing tactics, technology integration, internal organization, training, and even incentive compensation.
A channel strategy may involve decisions about goals, budgets and compensation. So, when Brian Warfel, EVP/retail delivery and branding at $550 million Power Financial Credit Union in Pembroke Pines, Fla., says his CU is “channel agnostic,” he backs up that claim.
“When we have sales team meetings, they bring together more than branch managers. We include electronic commerce, marketing and training to reinforce that we’re all involved in all our initiatives. If you’re not careful, you can get unhealthy rivalry, even predatory practices, among channels,” he cautions.
Restraining rivalry means taking a careful approach to incentive compensation. “We have goals for each branch and for online banking that are set at the beginning of each year,” he explains. “The goals are pretty aggressive, but they’re equally aggressive for each branch or channel.” Incentives are paid monthly, and nobody gets an incentive until the unit meets its goal. “Employees all know that everybody has to row to meet the production goal before any incentives are paid,” he notes.
“The units that bring in the most business get the most resources for the future,” Warfel continues. “During budget preparation, we always look at the performance of each channel to determine how budget dollars will be allocated for the upcoming year. An increase in budget dollars carries with it an increased production goal. The organization is focused on an enterprise wide scorecard. While each channel has its own production goal, it rolls up to the organizational number and that is the number we talk about hitting.”
Marketing Overlay
Marketing spans all channels and branches, of course. “Marketing has to figure out how to drive traffic to the branches or the Web, and they typically look at the most efficient way to get each product to our members,” Warfel explains. That may mean starting a promotion online and following up with a call-out campaign from the call center or a branch.
For a successful channel strategy, put the emphasis on strategy, urges Kelly Trammell, managing director of technology management services at Sheshunoff Consulting + Solutions, Austin, Texas. Don’t just add the latest products and services and hope members use them, he says. A good channel strategy grows out of the CU’s business strategy, not out of the technology marketplace, he insists.
“A lot of CU executives make tactical moves, which usually means following the herd and making incremental improvements as vendors make persuasive pitches,” but often CU execs continue to regard branches as the primary channel. The challenge is to shop tactically for the best vendor solutions, but choose them because they advance an integrated, strategic plan. Don’t go out and buy cool products and then try to build a strategic plan around them, he advises.
Spending and member experience are tightly linked because most electronic channel upgrades will be vendor offerings, usually outsourced and often cloud-based, says Steve Williams, principal of CUES Supplier member and strategic provider Cornerstone Advisors, Scottsdale, Ariz. Sometimes a staff hire or training will also be required, he notes.
When a channel offering like mobile banking comes off a vendor shelf, integration can be an issue but a manageable one, Williams insists. “The major vendors generally have learned to interoperate pretty well,” he notes, “but it’s important to negotiate the integration points before you sign a contract.”
For CUs, integration is not simply a technical issue. “You want all your channels to work together,” Williams points out. “With more and more of the activity coming in through the Web and call center, credit unions with a branch-centric sales culture will have to adjust.”
Implementing a channel strategy involves vendor selection but also internal organization, Williams notes. “IT needs to be involved but not the sole driver. The head of retail needs to be involved in a big way.” Most CUs will end up with a dedicated manager for the remote channels who will report to a senior manager like the chief operating officer, he says.
$1.5 billion Truliant Federal Credit Union in Winston-Salem, N.C., recognizes six channels, according to Rik Kielbasa, VP/member experience/member contact channels: the member financial center (branch), ATM, online channel, mobile channel, call center and interactive voice-response system.
The remote services—online, mobile, call center and IVR—and the branches are managed directly by Kielbasa, while ATMs are managed by branch management, IT and card services, he explains. Balancing the needs and potential of all these channels is a challenge, he admits. “When you talk to mobile banking vendors, they tell you that channel will be the most important. Then you talk to a branch automation vendor who says the branches are the most important. Each channel has its champions, but you need to look into the research that they use to back up their claims,” he says.
A good channel strategy recognizes complexity. The simplest, most routine transactions fit well with the most efficient remote channels for members who are comfortable using those channels, Kielbasa explains. Branches probably will always have a role for complex situations like reviewing credit scores, working out debt consolidation or family financial planning, he adds. “The channels need to be right for the complexity of the transactions you expect them to attract. All transactions are not equal in complexity or emotional weight.” Consultative transactions are more likely to occur in higher cost channels, he notes.
Training plays a role in channel strategy and agnosticism at Truliant FCU. It is not uncommon to have a new hire start in the call center handling general requests and then maybe graduate to the loan call center before he transfers to a branch to serve as a member service specialist on the platform. “They learn to support the process whether the member wants to close the loan over the phone or in a branch,” Kielbasa points out.
Cost Differences
Agnostic as he may be, Kielbasa is happy to see the mobile channel grow for two reasons. One is customer retention.
“Research shows that members who use the mobile channel are less likely to leave the credit union,” he reports. “Mobile drives deeper engagement, which is also a cost saver, since it reduces the cost of acquiring new members to offset members who leave.”
The second reason is direct cost savings. “Delivering services through mobile and online channels is much cheaper than the branch channel,” he notes. “A transaction in a branch typically costs $4.50 to $5. The same transaction in the call center costs about $3.50. But the cost of those transactions through online or mobile channels is just 13 to 17 cents each.”
However, Truliant FCU rejects the strategy of some CUs that actively drive low value transactions to the lowest cost channel. “We don’t use fees or rewards as incentives to move traffic,” Kielbasa notes, recalling that a friend who uses a large bank has to pay a fee if she uses a branch more than twice a month. “We won’t do that,” he insists.
Nevertheless, a growing number of younger members do show an aversion to traveling to a branch to get their banking done. “My daughter wouldn’t think of going to a branch,” Kielbasa admits. “She does everything she can with her mobile. She’s a college student, and if she runs out of money, she texts me and I use my mobile to transfer funds to her account. That’s just how she wants it to work.”
Truliant FCU added mobile banking last year and invested enough to provide SMS (short message service) texting, mobile Web, and an app for the iPhone/iPad, Kielbasa reports. So far cannibalization has not been an issue.
“We don’t see much migration from one channel to another,” he says. “Members tend to use multiple channels instead of picking one they like best.”
Measured Spending
CUs generally have done a good job of using online and mobile banking channels to provide basic member services more conveniently for members and more economically for CUs, Williams reports. But they have not done so well at using multiple channels to deepen members’ ties or acquire new members.
That’s something big banks have done well, Williams reports. “They’ve made the investments and they are getting the results—attracting new customers and giving existing customers a richer service experience when they log in.”
It’s not realistic for small CUs to spend like big banks, he concedes. Instead CU executives need to set priorities and move forward one step at a time.
“There are a great many things credit unions could do to improve the member experience, but they all come with a price, so credit unions need a road map for channel improvement that reflects priorities,” he says.
And they don’t have to pick the best-in-class solution every time. “It makes sense sometimes to start small and learn as you go—preparing yourselves and your members for a series of upgrades,” he notes.
Richard H. Gamble is a freelance writer based in Colorado.
