Craig Beach is senior vice president of marketing and business development for CO-OP Shared Branching. Beach is responsible for CO-OP Shared Branching’s marketing, advertising, and sales. Prior to his current position, Beach was vice president/chief operating officer of Georgia Central Credit Union for nine years, where he helped build the corporate credit union to a more than $1 billion organization.
Here, Beach shares insight about CO-OP’s program, the link between shared branching services and member profitability, and the strengths of a cooperative network.
Q: Looking back on 2009, what challenges (foreseen or otherwise) and triumphs have CO-OP and the CUSO movement experienced? What has CO-OP experienced in terms of growth and credit union participation?
A: During 2009, the biggest challenge was the ailing economy. It affected every market segment, and financial institutions were no exception. CO-OP Shared Branching offered credit unions the opportunity to provide their members thousands of locations nationwide without the cost of brick and mortar.
In 2009, CO-OP Shared Branching added 111 new credit unions and 490 new outlet locations. This is an increase when compared to new credit unions added in 2008. Despite the economy, credit unions still see value in shared branching.
Q: What does the recent Raddon study reveal as far the convenience factor shared branching offers to credit union members?
A: Shared branching is a service that is intended to make participating credit unions more convenient to their members. Raddon Financial Group conducted a shared branching study over a two-year period, 2008-2009, consisting of 25 credit unions on behalf of CO-OP Shared Branching. These credit unions represented various geographic regions, asset sizes, and charter types. Research topics included identifying transactional data, demographic make-up of shared branch users, how convenience plays into member usage of shared branches, and the profitability of shared branching.
On average 6.8% of member households actively use shared branching. However, of the institutions analyzed, this household usage percentage ranged between 1% and 18%.The households that use shared branching are likely to use it regularly, with 47.9% conducting 25 or more transactions each year.
Q: How does this affect the credit unions return and net income long term?
A: The study proved households utilizing shared branching are very valuable members in terms of the profit they generate and the relationships they bring to the credit union. Within this study, 38.6% of all shared branching households are profitable, yet only 28.8% of the households that do not use shared branching are profitable. So even though 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.
On average, the annual household profit for shared branching users was $90.25, compared to a profit of $7.07 for households that do not use shared branching. Even after adding in the direct costs associated with shared branching transactions, the average profit remains $47.53 per user household.
There is a correlation between households that are more profitable and their use of shared branches. The profile of the types of products these households have helps to answer the question of why such a correlation exists. For example, the product penetration of checking accounts is significantly stronger in shared branching households. The presence of a checking account within a household is a key attribute, as it often signifies the credit union is the household’s primary financial institution.
Q: What other advantages does CUSO involvement present participating credit unions in terms of financial return or expanded service options?
A: When a credit union joins CO-OP Shared Branching, it automatically becomes an issuer; its members have access to perform transactions at more than 4,000 shared branching locations. It also has the option to become an acquirer (outlet), where other participating credit unions’ members can perform transactions. In becoming an acquirer, a credit union can generate revenue, which assists in off-setting the initial fees associated in joining shared branching.
For the credit unions included in Raddon’s shared branching study, 12 of the 25 that participate as an acquirer (outlet) returned a positive net income, with an average annual net income of $63,801.
Through the Next Generation Network (NGN): Universal Hub, credit unions are linked not only to shared branching but also to a comprehensive suite of innovative products and services. These include the mobile banking product, home deposit remote capture, ATM check imaging kiosks, and the 24/7 call center and lending services.
Q: As multi-owned CUSOs evolve, what do you see for the CUSO model in the near future?
A: From a standpoint of providing convenience to members, the CUSO model continues to be the most advantageous way for credit unions to offer access points similar to larger financial institutions. Shared branching and ATM access offers the best example. These services can only be offered through the collaboration among credit unions, state organizations, and CUSOs.