Credit Unions Vs. Banks: Who's Winning The Deposit War?

Harland Financial Solutions’ Deposit Benchmarking service measures participating banks’ and credit unions’ deposit performance in the areas of acquisition, retention, and organic growth by deposit type and by consumer and non-consumer. At the recent BAI Retail Delivery conference, Harland VP of Market Development Sam Kilmer hosted a panel in which he presented some data from the study.

The study encompassed 148 credit unions and 102 banks (mostly community banks, I believe).  For the calendar year 2008, participating banks and credit unions turned in the following percentage changes in deposits from 2007:

                            CUs         Banks
New customer acquisition    5.1%        9.6%
Attrition                  -1.9%       -5.1%
Organic growth              4.1%        1.2%
                           -----       -----
Total deposit growth        7.2%        5.7%

Although the study represents just a small sample of the credit unions and community banks out there, the results are very interesting. It implies that banks are doing a better job of acquiring new customers, while credit unions are doing a better job at not just retaining customers (I  know, members), but at growing their relationship with existing customers.

The banks’ higher rate of deposit growth from new customers is not just a matter of buying new customers with higher rates, however. In fact, Harland found that the weighted average rate offered on deposits was higher among the credit unions than among the banks. So if anything, it’s the CUs that are picking up the rate shoppers that nobody seems to want to admit to wanting.

Overall, this is interesting data that banks and community banks could use to benchmark their own performance against, and I hope Harland will go public with the 2009 data when it becomes available.