Through the year-plus pandemic period, the anti-branch crowd was having a field day, declaring that coronavirus closures had finally forced the banking industry to admit that they’d been right all along. But now that America has been opening back up, here and there has been heard the thought that maybe this attitude was premature, that people missed face-to-face banking with people and that a completely branch-free industry isn’t the way to go.
Dennis Devine, CEO of Alliant Credit Union has no truck with that view.
In mid-2020, during the pandemic, Devine moved to Alliant from KeyBank, where he had been President, Consumer Banking. Devine comes from a career of nearly two decades with regional banks, including Key and Citizens and PNC, all of them still branch-heavy. He arrived at Alliant shortly after the nationwide credit union had chosen to close its last branches and go completely digital. Having assisted in implementing that strategy, the CEO is not having second thoughts now.
“How many bank branches do you think are going to be closed this year by traditional institutions? To me, that speaks volumes around their being dated and underutilized, moreso every day.”
— Dennis Devine, Alliant Credit Union
Instead of physical locations, Alliant, once the United Airlines credit union but now with members in every state, offers 24/7 customer support behind its website, mobile app and a huge network of ATMs. Service includes a feature which enables support staff to spend as much time as necessary to solve caller problems, without being penalized by efficiency timing models.
Some consumers will want a varying mix of channels, but that’s no reason to hang onto branches, Devine insists. “The fact that there might be some hangers on for the old model doesn’t make it right anymore. There’s a reason that branch consolidation is happening so quickly and why every challenger institution that you see succeeding is doing so with a digital ‘modus operandi’.” (Devine is an attorney by training.)
Closing branches changes the economics of Alliant’s business.
“Digital banking is the future,” says Devine. “Our digital model allows us to have the industry’s best cost structure, because we are no longer supporting the expenses of the distribution network. Rather than indirectly imposing the costs of those branches on our members, we are able to reward them with incredible rates and with low fees. In fact, we are able to offer savings rates today that are a hair better than those offered by even the leading direct banks, let alone by the retail branching banks.”
He points out with noticeable pride that Alliant fee income comes to less than 1% of its $14 billion in assets, “which is a fraction of what banks and other credit unions see.” This is among the factors, he says, that have given Alliant widespread recognition in “best” lists by Bankrate.com, NerdWallet and other trackers.
Blending the People Factor with Automation Efficiencies
Having shifted from a string of banks to a major credit union, Devine aspires for Alliant to go forward as a “challenger financial institution, that just happens to be structured and chartered as a credit union.”
Yet Devine says he appreciates that going digital can’t leave the human being out of the service model completely. A good illustration of this comes from Alliant’s current reasoning over the idea of introducing digital wealth management for its members.
“We have been looking long and hard at the power of financial and investment advice delivered to members as a digital experience,” says Devine. “The costs attached to the human interaction around traditional investment service are high — ‘face to face’ advice is very expensive and it’s tough to scale. However, the notion of ‘build a digital robo advisor and they will come’ is not what we think will be the case either.”
The experience with mainstream banking during the pandemic for many institutions bolsters this, according to Devine. For many consumers, getting any advice from their financial institution was more likely to occur over the phone than in person, and this demonstrated the reassurance provided by a human voice, even if disembodied.
So Devine sees Alliant in time coming down to a blend of robo investment advisor with a human element. He estimates that going partially robo would save more than 100 basis points of cost over a human-driven advisory service. Relying on digital for the rote work and people to answer questions means that part of that 100 basis points can be passed through to consumers, says Devine.
Letting Go of Old Concepts:
The idea of any bank or credit union being someone’s primary financial institution has come to be a very dated concept.
“It’s a myth that any financially savvy household will maintain only one financial relationship or that they will turn to only that relationship when they have a financial need,” says Devine.
He says it’s more important to him that Alliant both understand its members and their needs better and “figure out where Alliant fits super squarely in places where we can truly offer distinctive value.”
Doing Banking When Deposits Are Huge and Consumer Lending Light
During 2020 Alliant began working with consumer finance expert Suze Orman as an influencer. One aspect of that is the credit union’s sponsorship of Orman’s podcast, “Women & Money (and the Men Smart Enough to Listen).” Another is a special Suze Orman “Ultimate Opportunity Savings Account.” The account gives any new member who deposits at least $100 a month for 12 months, and who has a balance of at least $1,200 at the end of that time, a $100 bonus.
Devine says that program has been going well, but in an interview with The Financial Brand he was asked why Alliant made such an offer during a deposit glut. He explains that Alliant wants to encourage prudent saving.
“In the midst of a pandemic it was a great idea to encourage building up emergency savings,” says Devine. Alliant won’t always be awash in money, but members can always use rainy day funds.
While Alliant’s loan-to-deposit ratio is up, like many other institutions, it has enjoyed the boom in mortgages. In addition Alliant has a strong commercial lending effort that has done well in spite of the Covid economy. Alliant has lending partnerships with multiple fintechs and other firms that enable it to apply deposits to some specialized businesses, such as debt consolidation lending and solar energy construction. In some cases loans are retained for Alliant’s own portfolio and in other cases they are re-sold to other credit unions that need assets.
With consumer lending, management walks a line between waiting for consumer credit demand to rebound naturally and marketing prudently.
“No good business leader is going to just stand still and watch conditions unfold,” says Devine. “But you also don’t want to make bad credit risk decisions at this point in the cycle.”