Q.
Question: Our credit union is one of those operating in what you often hear called a ‘saturated’ market, i.e., a branch on every corner. I feel our growth has been competitive, but not overwhelming. But I feel we’re really not getting much of our current members’ business. In looking at branch/member profitability, can someone give us an idea of how long a good, thorough review of this kind of data ought to really take us? And could we get a heads up on what data we might be overlooking or not considering? Thank you.
Bill Handel, Vice President of Research and Product Development, Raddon Financial Group.
Profitability analysis will provide you with insight but may not adequately answer your question. The more useful view is your share of your member’s wallet. This is an analysis that compares what deposit and loan accounts and balances your members have with you versus what they have elsewhere. What they have with you is easy to know, but what they have elsewhere is a little more difficult to determine, but it can be estimated.
In our work with credit unions, we use our national consumer research studies to determine the product and balance use patterns of various demographic groups in the U.S. We then look at a client’s demographic mix and on that basis construct a “full wallet” – that is, what we estimate is their members’ full deposit and loan balances at all institutions. Once this estimate is completed, determining the share of wallet is simple – compare what your members have with you against the full wallet.
Our analysis shows that the typical credit union controls approximately 30% of the deposit wallet of their members and 25% of the loan wallet. That means that 70% of the members deposits are at other financial institutions and 75% of loans are elsewhere. The top performers will achieve share of wallet of approximately 45% or more. There are differences demographically – most credit unions control a smaller part of their younger members’ wallets – and differences by product – auto loan share of wallet is often over 50%.
If the share of wallet is below 20%, your growth emphasis should be on existing members. If, on the other hand, share of wallet is in the high 30% range or higher, this suggests that the growth priority should be new members. Assessing share of wallet by product and segment also helps to determine in which segments and products to focus your marketing efforts.
