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This Branch is Now Closed

While recently traveling in England, a colleague sent me a photo of a sign posted in the window of a Lloyd’s Bank branch in London’s elite West End.  

Knowing my interest in high performance cars that are well beyond my budget, she found it ironic that the branch was located right between a Ferrari and Bugatti dealership. The sign’s headline announced:  

This branch is now closed.

Below that it read: 

Why we’ve decided to do this.

The way people choose to bank with us has
been changing for some time. We looked at
how often and why our customers use
branches, and how they’re choosing
alternative ways to bank. To find out more,
take a look at our Closing Branch Review
Document at Branchreview.

So I did.

Listed here were nearly 100 Lloyd’s branches that had been recently closed. What I found particularly interesting was the analytical detail regarding the closing of each branch. Included here were pie charts and bar graphs, along with plenty of supporting narrative to further validate the research. All there for Lloyd’s customers – and the world for that matter – to see.  

The findings for this and the other closed locations was clear and consistent: In-branch transactions had fallen precipitously — in some cases as much as 75%! And this wasn’t simply a pandemic-thing … the freefall had been tracked all the way back to 2016. 

Is it Just Me?

Upon review, several thoughts immediately came to mind.

1.    How much was Lloyd’s losing on these failed real estate commitments? Total losses from early lease terminations and capital expenditure write-downs would conservatively be tens of millions of pounds.

2.    How much time, effort and money have been spent analyzing, documenting and now communicating these failures to customers and stakeholders? Again, thousands of internal staff and outside auditing hours totaling more millions.

3.    How confident is Lloyd’s leadership that these closings will result in a stronger organization and better-served customer base going forward? The answer to-date is at best theoretical and currently unknown.

The one thing I didn’t wonder is how all this came to be. The answer to that was obvious. It’s because Lloyd’s made the strategic decision to have it this way. 235-year old Lloyd’s Bank – along with nearly every other major retail bank the world over – has bet its future on virtual, rather than face-to-face, service. On speed over substance. On volume over value.

Risk vs Reward or Just Risk?

Major retail banks have been setting the stage for this scenario for some time, confident that any current losses will ultimately be replaced by greater financial gains. That is their existential wager. Their big bet.

This is Money, a leading London-based financial website, reports that approximately 1,000 large retail branches will close in England by the end of the year. With ongoing consolidations and the rapid growth of Fintech, major bank branch closures in the U.S. will again far exceed those in the United Kingdom. They certainly did last year.  

The bottom line is that — for retail banks — closing branches is their “new normal” strategy. In the majority of cases, opening new branches is a “loss leader” designed to establish new accounts in targeted markets. Once they achieve their desired market penetration, the goal to is shift their customers away from more costly in-branch service to digital self-service. Lloyd’s was more than forthcoming about this strategy.

But this doesn’t hold true for credit unions – thankfully.

More than ever, credit unions are and remain the “local bank” in communities nationwide, especially in low-moderate income (LMI) areas, where residents and small businesses are welcome and supported. This is not to say that credit unions are less techno-savvy than large banks – not at all. It is simply that credit unions are more about fulfilling a vision for members rather than their profit margin for shareholders.

Members Over Marketing

To me, all of this spells opportunity for credit unions. That is as long as CU leadership continue to hold true to the core values and differentiators that have long distinguished credit unions from retail banks. Those differentiators being personal relationships, pragmatism, accountability, high quality in-branch service, better rates and lower operating and marketing costs. 

Lloyd’s marketing tagline is “We’re Always by Your Side.” Of course they’re not but saying ”We’re Always by Your Digital Device” doesn’t quite cut it. Credit unions operate with different sensibilities and commitments to their staffs and members and those sensibilities are becoming a greater and greater marketing benefit. That’s why credit union branches matter! 

I’ve been at this a long time and, while I’ve learned to “never say never,” I’m pretty confident I won’t see a credit union branch wedged between two luxury car dealerships. And I also won’t see a credit union with the tagline reading “Whenever You Log On, We’ll Be Right With You, In a Way, Probably, Sort Of.”

Corey A. Waite is the leading commercial real estate advisor to the credit union industry. As Founder and CEO of Rubicon Concierge Real Estate Services, Corey works directly with senior Credit Union leadership to deliver strategic plans and transactional services focused on headquarters and branch locations alike. With a clear understanding of the unique mission and challenges of the Credit Union industry, Rubicon’s expertise and service is truly unique and value-added. You can reach the Rubicon Team at +1 (213) 462-2810.

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