MADISON, Wis. – Despite accusations that credit unions are losing their focus on serving the underserved, a recent study by the Filene Research Institute indicates that may not be the case. Based on an analysis of the Survey of Consumer Finances, an in-home survey of 4,309 households sponsored by the Federal Reserve Board with the cooperation of the Statistics of Income Division of the Internal Revenue Service, the study’s authors Drs. Jinkook Lee and William Kelly, find that bank customers are more likely to have higher incomes and greater wealth than credit union members. “This study gives us a more detailed view than just members vs. non-members,” said Filene Research Institute Executive Director Robert F. Hoel. “We’ve discovered the potential for credit unions. Members like their credit union, but credit unions are experiencing big time leakage with members doing more business with banks.” The study, Who Uses Credit Unions? segments credit union and bank users into five categories. Only 6% of those surveyed use credit unions exclusively compared to 59% who use banks exclusively. In addition, 16% use both but have more of their savings in banks; 12% use both but have more of their savings in credit unions; and 7% are unbanked using neither credit union nor bank. According to the study, households that use only banks have higher incomes, the highest average net worth and the highest average net financial wealth. In addition, as households accumulate wealth, they often increase the number of institutions they use. “The inference is interesting,” said Hoel. “As members become more affluent they look at other financial institutions – mostly banks. But this is an opportunity for credit unions. If CUs can offer products and services for those members while reaching out to the unbanked then they can increase their share of business.” When trying to understand who uses credit unions, Lee and Kelly find that factors such as age, income, net financial wealth, education, occupation, race/ethnicity, marital status, and region are strongly linked to institutional choice. For example, study results show that credit unions appeal to consumers who are unemployed, retired, working in the service sector or in the crafts, while 93% of professionals use banks. Generally 30-40 year-old head of households are most likely to use only credit unions. In addition, the greater the education of the head of household, the more likely that household will belong exclusively to a credit union. As far as the unbanked, they are most commonly found in the Midwest-East North Central, Southwest-South Central regions. The ethnic group more likely to solely affiliate with credit unions is African-American, while Hispanics remain largely unbanked. Although Hoel was “quite surprised” by the large number of members that rely heavily on banks he recognizes the possibilities this study presents. “There is an enormous opportunity for credit unions to expand right now- just within their own membership,” said Hoel. “A big part of it is really communicating vividly to members how we can meet their needs through good salesmanship, perhaps relationship pricing, and/or offering the products they want.” Copies of Who Uses Credit Unions? are available free to Institute members. For more information call (608) 231-8550 or visit the Filene Research Institute Web site at www.filene.org. -firstname.lastname@example.org
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