Linking Member Satisfaction to Share of Deposits: Applying the Wallet Allocation Rule in CUs
In this report, Lerzan Aksoy, PhD, draws on a new tool—the Wallet Allocation Rule—to investigate how credit union managers can do a better job of translating high member satisfaction levels into improved share of deposits.
The findings of the research by Dr. Aksoy and her coauthors with regard to the satisfaction and NPS metrics that credit union managers typically measure and manage are sobering. Satisfaction and Net Promoter explain less than 10% of the variation in members’ share of deposits. This in large part explains why, despite the fact that credit unions hold the highest satisfaction levels for any industry tracked by the American Customer Satisfaction Index (ACSI), the share of deposits held by credit unions substantially lags that of their bank competitors.
The key distinction of this approach is that instead of relying on the absolute satisfaction score or NPS, the Wallet Allocation Rule focuses on two critical factors in linking these metrics to share of deposits:
- The relative rank that this score represents vis-à-vis the other financial institutions that members also use.
- The number of different financial institutions that members use (i.e., “number of brands”).
Getting credit union members to move their deposits from banks will require directly addressing the reasons they use other financial institutions. In particular, credit unions—perhaps in partnership with Credit Union Services Organizations (CUSOs)—must seek to minimize banks’ advantages in Internet banking, branch locations, and ATM networks.
The size of the problem makes this an issue that credit union managers must take seriously. Of those members who use more than one financial institution, each has on average about $25,414 in deposits going to competing institutions.
Categorized: 'Human Behavior'