I have travelled and visited with quite a few different CUs this year and have seen many different methods on how each is delivering services to their members. A few months back, I had a conversation with Joe Karlin on various delivery channels for our CUs and thought his ideas would be of interest to share in a guest blog. What follows are his thoughts on some ideas of delivery channels and extracting value from our branch networks.
We spend a great deal of time on our products and services, and rightly so. But do we spend the same amount of time on our delivery channels? Given changing technologies, consumer preferences and increasing competitions, our delivery channels are as important as the products and services we deliver. As well, one of our delivery channels – our branches – is ripe to extract value today while future delivery needs transform.
Delivery channels have changed drastically in the recent past. Just 35 years ago, online banking got its start. Within just the last decade, mobile banking was created, with adoption of that channel to the point where consumers now rank their mobile banking apps among their three most important apps.
As we look to the future of delivery channels, changes will continue, and will do so at an increasing pace. In the not-too-distant future, mobile interactions will be overshadowed by device-independent transactions, as we will leave our phones at home and use bio-authenticated public devices (e.g. a screen in the driverless Uber authenticates our identity via an eye scan or face scan, using that secure screen for activities now performed on our phone). And many transactions will move to what experts are calling the “invisible payments wave.” These are payments processed in the background without our specific, individual approval of each transaction (e.g. your smart-fridge ordering more milk when it sees you’re nearly out, without you specifically approving the individual transaction). At the same time, our virtual assistants will move from being reactive to our requests to serving in a proactive role (e.g. Alexa or Siri will learn our financial preferences and will automatically perform banking transactions on our behalf without our interaction).
As technologies improve and proliferate, our members’ preferences and their consumption habits will change. With attention to our membership’s future needs and preferences, we can be prepared to meet those needs. Two specific opportunities are 1) performing a product/services delivery analysis and 2) evaluating sales-leaseback on branch properties.
Delivery Analysis – Credit unions should undertake an analysis of delivery channels for its products and services. After this analysis, we can then develop a detailed plan for future delivery channels. The process starts with an analysis of members’ future needs, current and expected future products and services, and the channels to support those. Based on that analysis, we then develop the path from current configuration to the desired state.
Sale-Leaseback for Branches – Today, our branches play an important role. However, with evolving member needs and preference, branch volumes will continue to decline. And as we look out 10-15 years, the branches’ role will be significantly reduced. Given today’s strong commercial real estate market, we can extract value from our branches today by selling and leasing back those properties. Extracting value today allows us to invest that capital to benefit our members, while protecting ourselves from likely future property value declines (some investors have already started to demand increasing cap rates on branch properties due to long-term concerns about property uses/values). Current cap rates on most branches are very attractive, with cap rates typically in the 5.5% to 7.5% range. We have partnered with the nation’s largest CRE firm, combining our credit union expertise with their CRE expertise and connections, all while minimizing the credit union management’s time and effort.
Depending on a credit union’s preference, a sales-leaseback transaction can also provide the credit union with commercial loan volumes. While we have an established group of investors who invest in branch properties, we can also help find local or regional investor(s) and facilitate a sale-leaseback in which you (or other Pactola credit unions) serve as the loan originator.
Any time something is in flux, opportunities abound. We have a great opportunity to develop delivery channels that will set us up for success in the future. As well, that same change provides us the opportunity to extract value from our branch locations today. I would be happy to visit about either of these issues; please contact me and let’s schedule a quick call!
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Joe Karlin is CEO of Karlin Consulting LLC. Joe has worked in the financial services industry his entire career. Joe started as a CPA at Deloitte & Touche, auditing for the financial services industry before moving to one of the largest credit unions in the nation where Joe worked in both operational and executive levels. He has spent the last 13 years providing consulting services for banks and credit unions. Joe’s experience and expertise includes all aspects of lending, strategy and execution. Joe can be reached at:
joekarlin@me.com / OR / karlinconsultingllc@gmail.com
913-909-0793
linkedin.com/in/joekarlin/