ATLANTA-A new study has found shared branching has helped credit unions capture more consumers dissatisfied with banks, especially higher-revenue households.
Findings of a just-released study performed by Raddon Financial Group and sponsored by CO-OP Shared Branching. Craig Beach, SVP of marketing and business development for CO-OP Shared Branching, told Credit Union Journal the "flight to safety" is real. He said the correlation between households that are profitable and their use of shared branches is a combination of shared branching "being there" and the events of 2008-09 that led to an inflow of deposits.
"Because shared branching was available, credit unions were well-positioned to take advantage of the fact consumers were looking for safe havens," he explained.
Profit from shared branching households is due in part to the profile of types of products used by these households, the study found. For example, use of share draft accounts is high in shared branching households. Share draft accounts generally are held in the owner's PFI and generate significant non-interest income due to high transaction levels, resulting in a more profitable relationship.
Deposits are the most common transaction type after member verify, accounting for 26.2% of all transactions with an average amount of $1,226, the study said. Withdrawals (15.8%) and balance inquiries (11.3%) also rated high on the list.
The study found some 38.6% of the households that use shared branching are profitable, compared with 28.8% of households that do not use shared branching and are profitable, Raddon found. On average, the annual household profit for shared branching users was $90.25, compared to profit of just $7.07 on households that do not use shared branching. After applying the direct costs associated with shared branching transactions, the average profit remained a more-than-respectable $47.53, according to the study.
"Part of what we found is those folks that are using key products of the credit union are the most profitable," Beach assessed. "The credit unions' bread and butter are those who are likely to borrow and likely to have share drafts."
On average, 6.8% of member households "actively" use shared branching-defined as completing a transaction in the last 90 days. However, usage variance among members ranged from 1% to 18% by credit union. The households that do use shared branching are likely to use it regularly, with 47.9% conducting 25 or more transactions each year.
Beach said a "convenience assessment" found when people were 20 miles or more from their proprietary credit union, 36.7% of those households actively used shared branching. "Interestingly enough, 14.6% of shared branching users were within 20 miles of their home credit union; or even as close as five miles, which is 'very convenient.' We are concluding these share branch locations are better positioned to capture these members where they are working or playing."
Most credit unions have been drawing demographic circles around their members' residences and planning branches within five or 10 miles from those locations, "but it is difficult to plan where a member is going to work or shop. We have concluded credit unions need to continue to plan branches based on where their members live, but then offer shared branching locations to increase their convenience factor."
