The Best Members Use Shared Branching

The Best Members Use Shared Branching

NameTitle

2010 Raddon Study Review

Introduction

• Over a span of two years (2008 – 2009), Raddon Financial Group (RFG) and CO-OP Shared Branching analyzed the shared branching usage of 25 credit unions.

• Some of the research topics addressed include:● Most frequent type of transactions● Day and time transactions occur● Demographic composition of shared branching

households● Role of convenience of shared branching● Profitability of shared branching

Introduction

The 25 participating credit unions analyzed were from different geographic regions, asset sizes and charter types.

Asset Size

$50 to $100 Million 3

$100 to $200 Million 3

$200 to $500 Million 10

$500 to $1 Billion 5

$1 Billion and Over 4

Region

Eastern 5

Southeast 5

Great Lakes 6

Mid-South 3

Central 1

Mountain 5

Charter Type

Community 13

Multi-Seg 5

Single Sponsor 7

2008 Shared Branching Analysis:Quick Facts

RFG Shared Branching Analysis Project (Average)

Shared Branch Users vs. Non-Users (%)

6.9%

93.1%

Shared Branch Users Non-Users

2009 Shared Branching Analysis:Quick Facts

RFG Shared Branching Analysis Project (Average)

Shared Branch Users vs. Non-Users (%)

Transaction Counts by Type-2008RFG Shared Branching Analysis Project (Average)

Top Transactions by Count

Transaction Counts by Type-2009RFG Shared Branching Analysis Project (Average)

Top Transactions by Count

Transaction Details• Active use of shared branching averaged nearly 7%,

however usage ranged from 1% to 18% by credit union

• Households that use shared branching use it regularly, with over 47% conducting >25 transactions per year

• The most common type of transaction conducted was the “Verify” transaction, accounting for nearly 41% of all transactions.

• Deposits were the second most frequent type of transactions, accounting for approximately 25%, with an average amount of $1,226 in 2009.

• Withdrawals and balance inquiries were other common transaction types.

Transaction Details

• The highest level of transaction volume occurs between the hours of 11AM and 2PM, accounting for 36.3% of all transactions. 31.9% of transactions occur between 2-5 PM.

• On average, 10.3% of all transactions occurred after 5PM.

• Friday is the busiest day of shared branching activity, with 22.8% of each week’s transactions, with Monday a close second.

• Broken down by time and day, peak transaction volume is on Friday between 2 – 5 PM.

• Saturdays have very different usage patterns when compared to weekdays.

Segmentation Analysis

Consumer Segment SummaryFee Driven (<45 years old, <$30k income)

• Younger, low-income households• Generally unprofitable, high-volume

market• Some contribution to industry earnings

through credit card and auto loan use

Credit Driven (18-34 years old, $30k+ income)• Net borrowing market• Key segment for mass market lending• 93% of industry earnings from this

segment derived from credit product use

Middle Market (35-54 years old, $30-$100k income)

• Offer good profit potential to industry from both savings and borrowing perspective

• Attractive market to pursue

Low Income Depositor (45+ years old, <$30k income)

• Usually households are headed by single female

• No significant deposit potential and low credit use

Middle Income Depositor (55+ years old, $30-$100k income)

• Provide institutions deposit related profit• Retired, married, past child-rearing

and borrowing years

Upscale (35+ years old, $100k+ income)

• Highest level of profit potential• Greatest product usage• Highest balances in both deposit and

loan accounts• Spread accounts across multiple

financial institutions• High price sensitivity

Consumer SegmentsRFG Shared Branching Analysis Project (Average)

Younger Member Segments

• Do not have as large a base in the institutions analyzed, but are more likely than older segments to utilize shared branching

• May be surprising because generally more inclined to use electronic channels

• However, RFG research shows younger users do not limit their ability to access their accounts and branches remain significant for them

Branch Convenience

• Raddon plots the location of each household and branch on a map, and then measures the distance that each household is to the credit union’s branches.

• Households without a credit union branch within 20 miles from their home account for 22.3% of all households at a credit union.

• These households represent 36.7% of active users of a shared branching location.

Branch Convenience – Percent of Households RFG Shared Branching Analysis Project (Average)

Profitability & Product Usage

Profitability

• The profitability is measured in terms of both overall household profitability, as well as profit derived strictly from the shared branching operation.

• The overall annual household profit, an average of 29.4% of the households analyzed had a profit greater than $0.

• 70.6% of households were unprofitable.• For households using shared branching, 38.6%

were profitable, which is ten percent more than the 28.8 % of households that don’t use shared branching, which are profitable.

Profit Analysis - Households RFG Shared Branching Analysis Project (Average)

Shared Branch Users

Shared Branching Profitability Factors RFG Shared Branching Analysis Project (Average)

Household Deposit Product Usage - Penetration RFG Shared Branching Analysis Project (Average)

Shared Branching Analysis- Summary$50 - $100 Million OH Credit Union

• 17.7% of members are shared branch users• The two most frequent transaction types are Verify and Withdrawal• The highest transaction volume occurs on Fridays between

2 PM and 5 PM• CU members have used 285 different shared branch locations• 34.5% of overall households are profitable; 40.9% of user

households are profitable

Shared Branching Analysis- Summary$200 - $500 Million OH Credit Union

• 8.3% of members are shared branch users• The two most frequent transaction types are Verify and Deposit• The highest transaction volume occurs on Fridays between

11 AM and 2 PM• CU members have used 482 different shared branch locations• 26.7% of overall households are profitable; 30.2% of user

households are profitable• Although shared branch users represent 8.3% of overall

households, they account for 52.4% of overall profit

Conclusion• Shared branching is a service which is intended

to make participating credit unions more convenient to their members.

• This analysis has shown that households that utilize this service are often very valuable members in terms of the profit they generate and the relationships they bring to the credit union.

• 29.4% of overall households are profitable; 38.6% of shared branching households are profitable.

• The shared branching members that are a part of this analysis have used an average of 510 different shared branching locations.

Conclusion

• Although shared branching users only make up 6.8% of all the households at the average credit union, they bring in 12.7% of the total profit.

• 48% of shared branching households make up active users that conduct more than 25 shared branching transactions each year.

• Shared branching is also a source of revenue for those credit unions that operate as an outlet.

• The average annual net income achieved by shared branching as an outlet was $63,801, with 48% of the institutions generating a positive return.

Shared Branching Adoption in Today’s Climate – A National Perspective

• 578 new locations added in 2009

• 133 CUs added to the network in 2009

• Despite economic turndown, credit unions still believe shared branching is a valuable asset

The Next Generation Network

• The Next Generation of Shared Branching• A system that provides convenience for credit

union members• Fraud-resistant and technologically advanced• The only credit union owned shared branching

switch• Cost-effective

• Initial and on-going support

Next Generation Network

CO-OP Shared Branchingallows your members to access their accounts from thousands of locations nationwide, just like they would at their home branch.

Keep pace with your members by providing access anywhere with CO-OP Mobile.

Harnessing check-imaging technology CO-OP My Deposit gives your members a “branch” right In their own home or office.

CO-OP Member Center gives anytime, anywhere call center access for your members.

At the airport, grocery store, hotel, SEG location, or even your own lobby, CO-OP Fast Branch kiosks deliver everything your members expect at the teller window – except the lines.

Questions?