While Banks Shut Customers Out, CUs Can Usher Them Through (Shared) Door
Growing numbers of credit unions shuttering branches to drive down expenses. Many slashing operating budgets leaving little money for new brick and mortar. Credit unions seeing members move across town and across the country in search of new jobs.
No doubt, these are difficult days for our industry.
But looks are deceiving. Despite today's challenging times, CUs are finding new growth opportunities with shared branching — a silver lining in the current recession.
Shared branching is a smart way to level the playing field in the highly competitive financial services industry. It lets credit unions provide their members access to thousands of branches nationwide. And with credit unions' spreads tight and income down, it's a strategy worth serious consideration.
Findings by the Federal Reserve indicate branch locations are the top reason a consumer chooses to bank at a particular institution. But by themselves, most credit unions have fewer than 10 branches. Enter credit union shared branching, with 3,700 participating branch locations.
Shared branching helps credit unions keep a presence in the communities they serve — and keep their members. That's especially important in a time when credit unions are facing hard choices about branch closures and budget cuts. While shuttering branches may be viewed negatively by members, shared branching is a smart choice for expansion that is likely to better meet members' needs.
Shared branching makes good financial sense, too. A study released in April by the Raddon Financial Group for CO-OP Shared Branching reported that offering shared branches positively affects credit union profitability — especially important in today's economy. Key findings from the study included:
- While on average, seven percent of members are shared branch users, shared branching users represent 23% of a credit union's overall profitability.
- Even after factoring in costs, shared branch households generate an average profit for credit unions of two-and-a-half times that of non-user households.
- Deposits are the most common shared branching transaction type, and average $784 per transaction.
Wearing the White HatBanks have a collective black eye today, thanks to their lackluster performance, off-the-chart losses and taxpayer bailouts. But while CUs have also felt the effects of the down economy, they continue to wear the white hats. From Wall Street to Main Street, CUs are being heralded in the media as safe havens. We need to channel those good feelings to create easy access for consumers — the biggest single concern they have about using a credit union. Shared branching bridges this gap.
At our recent THINK conference, one recurring theme that emerged was the opportunity credit unions now have to grow their business. Industry veteran and former NCUA Chairman Dennis Dollar told attendees that when Wachovia signs come down and the Wells Fargo signs go up, a lot of checking accounts in a lot of communities will be up for grabs. He's right. For credit unions, there's never been a time like the present for growth and success. And in the current changing market — with fewer banks, bigger banks, and many banks where the U.S. government has a stake in their success — shared branching helps credit unions keep pace.
Credit unions know that by working together, we are better. Working together, members win. And one of our industry's most remarkable cooperative success stories: shared branching-a silver lining you can turn to in these challenging economic times.
Carroll Beach is president/COO of CO-OP Shared Branching. He can be reached at email@example.com or (866) 812-2872, x 1305.