PEMBROKE PINES, Fla.-Credit unions have tried to drive lobby-lovers to the virtual branch for years, under the assumption that online members are the most profitable - but in six months, Power Financial CU here will have the data it needs to confirm or dispel that theory.
"There's a lot of danger in assumptions," said Brian Warfel, EVP-sales and service at $480-million Power Financial (PFCU). "Until you have the baseline data, you don't know which delivers the best bang for the buck: the amount you spend to grow and maintain the electronic channel or the amount you spend to grow and maintain the physical channel."
Though PFCU's overall picture of profitability won't be available until June, Warfel said that the preliminary analysis has already confirmed that online members tend to hold higher account balances and more products and services.
Power Financial has segmented members into two categories: online members or branch members, said Warfel. An online member-someone who joins the CU via online account opening - will be redesignated a branch member if he or she completes more than five branch transactions per quarter.
The CU is considering all activity in each member account, as well as account balance, and whether members acquire new products online or at a branch, Warfel continued.
The revenue and expense of each transaction is tracked, in addition to other account maintenance expenses, such as the cost of account statements. The cost of acquiring the member is also measured in the form of marketing campaign expenses, for instance, as are costs for running physical branches or maintaining the website.
The First Key: Refining The Data Set
Power Financial would like to continue refining its data set, figuring in such details as the time it takes people to complete transactions with a representative at a physical branch, said Warfel.
Building the calculations for this complex comparative data has taken the CU more than a year, but last month, the calculations were put to the test: PFCU began automatically importing and analyzing all member transactions and associated expense data using a well-known MCIF and profitability platform. Baseline data that shows six months of relative profitability for each channel should be available by June, Warfel said.
The Second Key: Customization
Power Financial wasn't satisfied with the MCIF system's built-in template of revenue and expenses per transaction type, which was based on industry averages, so the CU customized the template to reflect the organization's actual figures, he said.
"The key to an accurate analysis is in the transaction data," Warfel explained. "That data will tell us what channel members are using and the different costs based on the channel; how many fee-based services are feeding back into the organization; and all fee waivers and reversals.
"The template provided in the MCIF isn't nearly as accurate," he continued. "We believe it greatly understates profitability for the organization. And we found some holes in the list of transactions."
There may be a few surprises in June, said Warfel: though most believe the electronic channel is more profitable, perhaps fee income at physical branches will offset the costs of the physical branch. "The electronic channel tends to be less fee-inclined."
PowerFi.org is equipped to handle an array of member service needs, said Warfel. Beyond online banking, people can open and fund accounts online as well as apply for loans, chat with a representative, and, most recently, use personal financial management software. "It's cheaper to invest in online technology than it is to invest in a branch and leasehold improvements," he said.
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