American consumers have been letting their fingers do the walking for a while now when it comes to banking online, and mobile banking helps make sure those fingers are sticky.
While that telcom slogan retreats into the yellowed pages of marketing history, comScore reports 81% of Americans over the age of 13 have a smartphone. But thousands of American credit unions still don’t let their members bank on them. There appears to be a disconnect.
Mobile has been a mandate for many credit unions for the past few years, and the economics clearly show why. It’s way more efficient than going into the branch. A Bain & Company report notes for every 100 mobile interactions there’s an average decline of 16 branch transactions. That same report finds that frequent mobile users are 40% less likely to switch banks.
A stroll through the Peer-to-Peer database at Callahan & Associates also telegraphs the telephone message: Credit unions that have mobile banking are much more likely to be successful than those that don’t, and yet many still don’t offer it.
As of mid-year, only 2,797 – or 52.9% – of the 5,286 credit unions under $500 million in assets in the United States offer mobile banking to their members. Nearly all of the larger credit unions do, and while they represent the bulk of the total membership, their smaller brethren under the half-billion line account for nearly 91% of the 5,815 member-owned cooperatives in the Callahan database.
Surely, the argument can be made that those 47.1% of credit unions under $500 million are indeed surviving without mobile. But the data dictates that their future may not be as bright as those that do.
Just look at that most basic of measures: Member growth. That group of 2,797 credit unions under $500 million that do offer mobile has shown positive member growth for the past four years, while the 2,489 that don’t have lost members in the aggregate. At second quarter 2017, those figures were 1.66% year-over-year for those that do and -1.06% for those that don’t.
The mobile bankers had a slightly better efficiency ratio – a measure of how much of a dollar it takes to make a dollar – at 82.04% mid-year for the mobile bankers and 85.67% for the non-mobile group. They also had markedly lower delinquent loans, 1.30% to 0.86% at mid-year. Their aggregate ROA also reflects those differences: 0.48% in Q2 2017 for the mobile bankers, 0.30% for the non-mobile group.
Also notable is the difference in a couple key measures of engagement in the Peer-to-Peer database. Mobile banking credit unions under $500 million in assets as of June 30, 2017, recorded 2.33 loan and share accounts per member, about 20% higher than the 1.92 for their non-mobile banking peers. Even more striking, the average member relationship for mobile banking credit unions in that asset-based peer group is nearly 35% higher than their counterparts at mid-year: $14,491 compared with $10,761.
As the accompanying charts on page 8 show, the difference between non-mobile and mobile banking credit unions in that asset class has held constant for the past four years, as mobile delivery of everything from banking to biscuits has become entrenched in daily commerce.
While every credit union has its own story to tell, and these numbers are totals that can be interpreted in various ways, the data doesn’t lie.
Mobile banking is just one item on the menu, but clearly its presence is one key indicator that a credit union is successfully meeting member needs and expectations. Successful integration is also important, not just on the back end but more importantly to the member experience.
A double bottom line here: As members adopt digital, agents can devote more time to supporting complex interactions and advising on higher-value products. That means deeper engagement and a stickier relationship.
Ian Melhorn is an Industry Analyst for Callahan & Associates. He can be reached at 202-223-3920 or email@example.com.