Consumers are increasingly discovering the benefits of cooperative financial institutions and are joining the 92.6 million people that currently belong to a credit union. In the past five years, new inflows of cash to credit unions have remained steady, averaging more than $45 billion each year. The spirit behind initiatives such as Move Your Money, Bank Transfer Day, and Balance Transfer Day remains vibrant, and credit unions are poised to set records in 2011.
“Toward the latter part of the third quarter, we saw a spike in our new account openings … we really could see an increase of account movement to those community institutions,” said Gary Norcross , chief operating officer and corporate executive vice president of FIS, during the payment provider’s third quarter earnings call.
Credit unions are taking this opportunity to not only welcome deposits but also cultivate deeper relationships with their members. In Live Oak, TX, Randolph-Brooks Federal Credit Union focuses on building holistic member relationships rather than concentrating on one business area. With that philosophical approach, it can justify the impact of member and deposit growth on its capital, which stands at 11.8% of 3Q 2011.
“Our main goal is to bring over the entire relationship,” says Mark Sekula executive vice president and chief lending officer of Texas-based Randolph-Brooks Federal Credit Union ($4.6B, Live Oak, TX). “We don't focus singularly on deposits or on loans. We want the full relationship.”
To that end, the credit union’s onboarding process includes several points of contact within the first 60 days. It is during that time that the credit union tries to cross-sell products to new members based on what the Marketing Customer Information File (MCIF) recommends is the next best product for them to take advantage of.
“We're in a position where, if we grow a little bit too quick or too quick as a result of these deposits coming in, it's not necessarily going to hurt us as much,” Sekula says. “We're hopefully going to be able to mine and build that relationship that starts with a deposit.”
According to Blake Lyons, vice president of marketing at the credit union, Randolph-Brooks’ lending products are priced competitively, as are its deposits products – from checking and savings to money makets and CDs. And thanks in part to the consumer backlash from banks levying fees for debit usage and other activities, Randolph-Brooks’ deposit relationships and new memberships have steadily grown.
Randolph-Brooks Federal Credit Union is headquartered in a competitive marketplace. With 545 credit unions and 7.7 million members as of June 30, 2011, Texas has more credit unions than any other state and holds more than 7% of U.S. credit union assets. Within Texas, Randolph-Brooks is the third largest financial cooperative, following Security Service Federal Credit Union ($6.5B, San Antonio, TX) and American Airlines ($6.0B, DFW Airport, TX). Despite that competition, its membership growth is nearly two-and-a-half times that of its peer group of credit unions with more than $1 billion in assets – 9.48% versus 3.83%, respectively.
Additionally, for third quarter 2011, Randolph-Brooks posted a share draft penetration rate of 68.5%, which is significantly higher than its peer group’s (credit unions with more than $1 billion is assets) average of 55.1%. It has also grown balances. As of September 30, share draft balances at Randolph-Brooks were up 35.8% over levels in September 2010.
The checking account is an important relationship builder for Randolph-Brooks, and encouraging debit usage keeps it top of wallet with its members. When the credit union considered launching a debit incentive program in 2006, it looked at other successful programs it already offered, such as its cash back gold credit card.
“Those members are some of the most loyal, high-using, transaction-using, profitable relationships the credit union could have,” Sekula says. “There is a tremendous stickiness and loyalty to that product."
So the credit union launched a rewards program that offers $0.10 back on debit transactions. With every swipe of the card – whether PIN or signature – the member earns cash back.
“It was an amount we felt that we could work with,” Sekula says. “We saw what the impact would be for every transaction and that we were still going to be able to be profitable.”
Plus, it makes a good marketing hook.
“We essentially use every channel available to promote our checking product,” Lyons says. “We offer one checking product and keep it as simple as possible. Swipe your card, earn a dime every time.”
The initiative has contributed not only to a growth in membership but also transaction volume. And even in today’s environment, the credit union stays committed to offering its rewards program.
“It's even more important now to let people know we're here to take care of their deposit relationship, that we want to be the checking account,” Sekula says.
The strategy has paid off. So much so, in fact, that the credit union is offering $0.15 back on debit purchases made during the fourth quarter.
“It's been a fantastic year,” Sekula says. “Because the year has been so fruitful, we decided right around the time of the holidays we would give back a little extra to our members, to say, ‘Thank you for a record-breaking year.’"