Did you know that phytoplankton — microscopic organisms in the ocean that are invisible to the naked eye — produce more than half of the Earth’s oxygen (more than all the world’s forests combined)? These tiny life forms play an outsized role in sustaining the planet’s ecosystems, demonstrating that scale is not always indicative of impact.The same could be said about micro branches: small, strategically designed locations that could offer community financial institutions (CFIs) a smart way to evolve their physical presence to keep pace with changing customer behaviors, manage operational costs, and capitalize on emerging technologies. While micro branches are not a new concept, they are gaining renewed relevance. We explore the role they can play in a CFI’s strategy.Why Physical Still Matters Although digital banking is now mainstream — 55% of Americans use mobile apps as their primary banking method — physical branches are still very relevant and play a crucial part in the banking ecosystem. In 2024, 52% of consumers visited a branch at least once, highlighting the continued value of in-person interaction. To balance evolving customer expectations with economic and operational pressures, many CFIs are exploring how micro branches could help them improve efficiencies and support growth of their physical footprint. The Strategic Case for Going SmallTypically ranging in size from 150 to 1,500 square feet, micro branches are tech-enabled and deliver full-service banking with fewer employees. Staffed by cross-trained universal bankers and equipped with interactive teller machines, self-service kiosks, and comfortable seating and digital signage, micro branches are built for efficiency and flexibility. They offer customers everything from quick transactions to private consultations. Here are some of the benefits of a micro branch:
- Reduced investment and operational risk. Given their small size, they’re faster — and cheaper — to build than a traditional physical branch, enabling CFIs to expand quickly into new areas with confidence. Their compact design and lower staffing requirements also mean reduced overheads (dropping by up to 61% in some cases) without sacrificing service.
- Meet customers where it suits them — whether that’s in a grocery store, transit hub, college campus, or underserved rural town. The modular nature of a micro branch offers access to real estate that would be out of reach for a traditional branch, giving institutions greater flexibility to test new markets and reach new demographics or underserved areas and communities.
- Adaptable and scalable. A micro branch initially focused on day-to-day banking can later be converted into a lending center, advice hub, or mobile banking unit, depending on a community’s evolving needs. These branches offer a scalable way for a CFI to maintain human connection and brand visibility relationships, while expanding its reach and reducing overheads.
Innovating Branch Delivery: Micro Branches in Action
- Tongass Federal Credit Union operates micro branches, or “microsites,” to serve Alaska’s most remote communities. Often just 100 square feet in size, these micro branches are set up in partnership with local organizations and hosted in shared spaces such as school buildings or community centers. In the village of Metlakatla, this model led to a 74-point increase in median credit scores, driven by access to services like credit-builder loans.
- Eastern Bank, a regional bank based in Boston, opened its first micro branch in the parking lot of a buzzing shopping center in 2017. The brand revamped an old Fotomat location into a 556-square-foot location to help expand its footprint into another town. The branch’s unique location features an ITM, an instant-issue debit card machine, and a drive-up ATM.
- Illinois-based BCU has embraced micro branches as a scalable, cost-effective way to expand access and deepen relationships with its members. Its 640-square-foot branch built under a staircase at a United Health Group office is a standout example of the 30 micro branches it operates — many in partner workplaces. These compact branches are staffed by a single Branch Experience Manager and offer a full range of services. They combine physical, digital, and self-service options to reach their members more flexibly.
- America’s Credit Union used a modular micro branch (called JunXion) to quickly establish a presence in Dallas while its full‑size branch was still under construction. It leveraged an unused space in its administrative building in a high‑traffic corporate area. Once the main branch opened, the modular components could be repurposed or relocated to a different market. This hybrid strategy let the institution deliver both advisory and transactional services in smaller, agile spaces while testing new markets and managing costs.
For CFIs looking to optimize their branch networks or expand into new areas, micro branches represent a cost-effective way to stay agile, meet customers where they are, and adapt to shifting expectations without losing the personal connection that defines community banking.
