Should You Open A Virtual Branch? (Plus, How to Do It)

Should You Open A Virtual Branch? (Plus, How to Do It)

Believe it or not, virtual branches are nothing new. The financial services giant USAA, founded in 1922, has been “virtual” for most of its history.

By the time the company finally started opening locations in 2010, it had been offering remote services for nearly a century and branchless banking for three decades. And even then, it only opened a few dozen spots. 

Now that everything’s online, you can easily do the same. But the question is, should you? And if you did, where do you begin? 

You’ll find all that and more in this guide.

Virtual Branches Make You Attractive, Agile, and Efficient

A virtual branch is when you offer services in an area where you have no physical presence. Customers or members can find that “branch” on your website and contact you there, but not visit. With virtual branches, you can: 

  • Pass the real estate savings along to your customers or members
  • Staff extra “branches” with existing employees
  • Handle overflow calls from busy branches
  • Gather data to improve your other online offerings

If you’re worried some customers will be bothered by not being able to visit in person, worry not. You can largely enjoy the benefits of virtual without upsetting most customers. 

Seventy-five percent of the U.S. does at least some of their banking online, and 32 percent say they’ll actually continue to avoid branches post-pandemic. It’s part of why Patelco, the 22nd-largest credit union, felt comfortable “virtualizing” 37 of its branches this year.  

Beyond the obvious, virtual branches can help you: 

1. Serve new and dispersed communities

Virtual branches also allow you to expand your base and better serve a geographically dispersed community. Take for example one federally chartered, Brooklyn-based credit union that serves firefighters. Not all firefighters live within driving distance of Long Island. With virtual branches, they’re now serving firefighters across the country. 

(Virtual will be especially important if a certain bill passes which would allow federally chartered credit unions to also help underserved communities beyond their typical area.)

2. Compete with fintech

Virtual branches can also prepare your institution to compete with neobanks. There will be 48 million digital-only bank account holders by 2024, up from 30 million today. A big reason people like neobanks is convenience. If you launch a virtual branch, it sets you on the path to parity. 

3. Find new talent

And finally, they can help you compete for talent. Virtual branches let you hire people anywhere within your time zone, and offer roles to folks who’d otherwise have difficulty coming into an office.

To Open a Virtual Branch, Run a Test

If opening a virtual branch seems like a good idea, we recommend testing out the idea in phases. Start  by:

  1. Hiring an out-of-region loan or mortgage officer. This helps you “plant a flag” in that area as that officer builds a client base. 
  2. Keeping your members that move away. During the pandemic, lots of institutions saw an exodus of customers to warmer, less-expensive locales. Those with virtual banking offerings were able to keep those customers, and if you enact a policy for this, you can too.
  3. Acquiring out-of-region assets, like mortgages. Then, cross-selling other digital banking services to that group.

Of course, virtual branching requires a basic foundation. You’ll need a strong online banking portal, messaging on your website that clarifies what virtual banking is and isn’t along with trained staff and a frictionless experience. Anywhere you require paperwork today, you’ll have to digitize with e-signatures and identity verification protocols or integrations.

Then there’s the question of support. Because people can’t just drop in, an online meeting booking software is essential. It’s fast and convenient, and allows people to self-serve. And because it can automatically add meetings to your staff’s calendar, it helps you avoid potential time zone issues or conflicts.

Just be sure that your virtual branch’s appointment scheduling software: 

  • Creates a virtual queue—if all agents are busy, it should communicate the wait time or let people book a future meeting. 
  • Integrates with your core banking system and calendars—otherwise, it leaves the potential for human error and missed meetings.
  • Allows for co-browsing—to minimize customer frustration, your agents need to be able to co-share a screen, move the cursor, and help customers navigate.
  • Allows for video banking—video can make virtual feel just as personal as in person.

To Sustain Your Virtual Branch, Create Feedback Loops

Feeling ready to open your virtual branch? Just be ready to keep it up for the long run. Two things can help:

  1. Create a customer feedback loop
  2. Build a marketing program around it

Feedback is essential because unlike with in-branch, it’s difficult to understand people’s moods or sentiments. You often won’t know something’s gone wrong because most upset customers don’t complain—they quietly disappear. 

Add a feedback tab to your website, request feedback after interactions and calls, and consider website analytics to show you where people click or drop off.

For marketing, prepare local advertising, digital ads, call campaigns, scripts, creative, and everything you’ll need to announce your presence and keep it up until the message sinks in. Outdoor advertising and radio are uniquely important here—you may not have a physical presence in the region, but billboards can make it seem like you do.

What’s Next? Time to Launch

When USAA launched in 1922, its primary mode of communication was tapping out dots and dashes on a telegraph. It didn’t get its first computer for 25 years. 

With a virtual branch powered by video calls, you’re in a much better position to help virtual customers sooner rather than later.

And if you spend as much effort perfecting your virtual experience as you have your in-branch one, you’ll be in a great position to staff, hire, and save in innovative ways that delight your customers.