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CUSB Misconception: Shared Branch Users are Not Valuable

A recent CO-OP Financial Services white paper is debunking myths about Credit Union Shared Branching. Here is an exert from the white paper that address the fourth misconception. Hear what fellow Missouri credit union representative Louie Delk has to say about the issue.

Misconception Four: Shared Branch Users are Not Valuable 

According to the consulting firm Experian, it costs six to seven times more to acquire a new member than to retain an existing one. Retaining five percent more of the “best” members can boost profits by as much as 100 percent. Therefore, it’s worthwhile to provide required services such as convenience through shared branching that helps credit unions develop expanded relationships with existing members. 

Despite the aforementioned logic, some credit unions believe that only members who have low checking and savings account balances use shared branching. For example, they have a limited relationship making only payday visits. “Shared branching is an incredible way of extending additional convenience to your members,” said Conservation Employees’ Credit Union’s CEO Louis Delk. To this end, extending convenience to all members deepens and expands relationships over time, which could bring a payday-only member to become an auto-loan candidate.

While online banking and other automated services have lessened branch traffic, tellers remain the front line for high-dollar transactions. A recent Celent report found that 90 percent of teller transactions were check deposits.

“Members use shared branches to make deposits and usually large deposits,” said Sarah Canepa Bang, President, FSCC, LLC, and Chief Strategy Officer, CO‑OP Shared Branching. “They use shared branching to make large deposits because they want to do multiple transactions with that money. When you deposit a $10,000 check, you probably want to use some of it to pay down a loan, get some cash back or transfer funds to another account. Shared branching provides the needed services and options that can’t be handled by a proprietary ATM.” 

In 2010, Raddon Financial Group (RFG), in association with CO‑OP Shared Branching, published the study, “Share Branching Probability Analysis.” The report analyzed the shared branching activity of twenty-five credit unions during 2008 and 2009. The credit unions studied had average deposits of $614 million and an average loan portfolio of $518 million. 

The most common type of transaction conducted was the “verify” transaction, which ensures the individual is part of the institution’s shared branching network. The “verify” transactions account for 40.8 percent of all transactions. The report noted a verification percentage below 50 percent is an indication that individuals are conducting multiple transactions per visit. Deposits were the next most frequent type of transaction, accounting for 26.2 percent of all transactions. Each deposit had an average dollar amount of $1,226. Withdrawals (15.8 percent) and balance inquiries (11.3 percent) were the other common types of transactions conducted. 

While the report found that shared branching users only make up 6.8 percent of all the households at the average credit union, they deliver 12.7 percent of the total profit. On average, the annual household profit for shared branching users was $90.25, compared to profit of only $7.07 on households that do not use shared branching, the report stated. After applying the direct costs associated with shared branching transactions, the average
profit remained at $47.53.

“Banks and credit unions are losing roughly four percent in [branch] transactions each year,” said Canepa Bang. “This is the exact reason credit unions should be using shared branching. Credit unions already have the branches operational and are paying tellers, so they might as well invite outside members to close the gap on the expense of operating.”

Click here to read the full report. 

Click here to learn more about Shared Branching.

 

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