Credit unions are outperforming community banks when it comes mobile banking customer enrollment. In addition, these credit unions are more likely to switch mobile banking vendors in search of an enhanced mobile offering.
These findings are based upon data from the 6,062 U.S. financial institutions that offer a personal mobile banking app as of October 31, 2015. For this study, that universe was narrowed slightly focusing on 2,249 credit unions and 3,742 community banks with total assets less than $10 billion.
Collectively, credit unions decisively beat their community bank counterparts in a unique measure of enrollment: mobile banking app installs per deposit account. Credit unions average 12.4 percent, while banks average 11.6 percent, a difference of 6.9 percent in enrollment. This trend is evident in three of the four asset segments, the lone exception being among the largest community financial institutions, where banks edge out the comparably-sized credit unions at 15.5 percent versus 14.7 percent.
Not only are the credit unions typically outperforming community banks in mobile banking enrollment, but they also tend to jettison their mobile banking vendors at a much higher rate. For the trailing-12 months ended October 31, 2015, credit unions changed vendors at well over twice the rate of community banks, with 7.4 percent converting (versus only 3.3 percent of banks). The higher vendor turnover occurred at every asset segment and only narrowed in the $1-$10 billion asset segment, where 8.1 percent of credit unions changed providers versus 6.2 percent of banks. The turnover analysis focused only on competitive churn, eliminating consolidation churn or the loss of financial institution clients due to acquisition, failure or other consolidation.
While many factors could contribute to these institution type differences, the most likely factor is consumer demographics. Credit unions are less likely to be located in rural markets and consumer demographics tend to skew younger in larger markets. Those younger customers are more likely to embrace a mobile banking offering versus retirees in rural towns. The demographic differential for banks and credit unions likely reverses in the largest asset segment as community banks in principally rural markets couldn’t achieve that size.
It’s surprising to see that credit unions are more prone to action regarding their mobile offering than community banks, but the reality is that financial institution management isn’t in charge – the consumer is. A typically younger demographic is more likely exerting greater pressure on these institutions to enhance their mobile offering. That pressure is then passed on to the financial institution’s vendor in terms of mobile performance.
Understanding your current customer demographics is an important component of evaluating your mobile performance. Ultimately, mobile banking success is predicated not only on an outstanding mobile solution, but also marketing that solution effectively to all demographics. The idea that “if you build it, they will come” might work in fiction, but in financial services we need to let them know it’s there.
Mr. Cotton is CEO and co-founder for Atlanta-based FI Navigator, a provider of web-based bank data and analytics. He can be reached directly at firstname.lastname@example.org or follow the company on LinkedIn at www.linkedin.com/company/fi-navigator-corporation and Twitter @FINavigator.