Study Finds That Shared Branching Helps Credit Unions Build Profits
Members who use shared branching services are more profitable for their CUs, according to a study commissioned by CO-OP Financial Services, the parent CUSO of CO-OP Shared Branching.
"A total of 38.6% of the households that use shared branching are profitable, which is 10% more than the 28.8% of households that do not use shared branching and are profitable," the CUSO reported. "On average, the annual household profit for shared branching users was $90.25, compared to a profit of only $7.07 on households that do not use shared branching. After applying the direct costs associated with shared branching transactions, the average profit was still $47.53."
Raddon Financial Group surveyed 25 shared branching credit unions at selected times over 2008 and 2009. The credit unions were deliberately chosen to reflect different regions, asset sizes and types of charter.
"It's no secret that convenience is essential to consumers," said Carroll Beach, chief operating officer for CO-OP Shared Branching. "This study gives us the hard data demonstrating that shared branching makes credit unions more accessible, which leads to deeper relationships that help retain active and profitable members."
Craig Beach, senior vice president of marketing for the firm, said the survey results had been carefully examined for the effects of the recession. "We definitely saw the numbers shift from 2008 to 2009," Beach said, "but the profitability remained."
The survey found that, 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 use shared branching are likely to use it regularly, with 47.9% making 25 or more transactions each year, the study reported.
The study also found that younger members were among the heavy users of shared branching services. Although the younger member segments do not have as large a base in the organizations the study looked at, they are more likely than the older segments to utilize shared branching, according to the results.
"This may come as a surprise because younger segments are generally more inclined to use new electronic channels," Beach said. "However, the research shows that younger users do not limit their ability to access their accounts and branches remain significant for them." He added that he believed younger members are motivated by a desire for convenience just as older members are. "If using a shared branch is convenient for getting a transaction done, they will use the shared branch," he said.
The study found that most members using shared branching use it to make deposits. Deposits are the most common transaction type after member verify, accounting for 26.2% of all transactions.