Growing Share of Wallet

Growing share of wallet among existing primary customers is one of the best opportunities for profitable growth for banks and credit unions.  Even the best financial institutions may have only 50% of their customers wallet.  If you measure share of wallet based on the relationship between share of market and share of members, there is a large disparity among the top credit unions on their share of wallet performance:

An index of 100 suggests share of wallet similar to the overall market average.

There are a number of factors other than excellence at share of wallet growth that could partially explain differences among credit unions.  For example:

  • Broker / Direct Channels:  Credit unions that use these channels tend to attract single product rather than primary customer relationships.
  • Special Offers:  Credit unions that grow with an emphasis on a single product offer like free Chequing, high rate savings or mortgages, may have a lower share of wallet due to the inflated number of non-core members.
  • Credit Union Brand Awareness:  Credit unions have much higher share of market in Manitoba, Saskatchewan, Quebec and BC than other provinces.  This may result in a higher level of individual credit union brand preference than in Provinces where credit unions are not as well represented.
  • Competitive Intensity:  Broker and direct channels tend to lead to more fragmented customer relationships as customers seek to optimize individual products.  These channels are most prominent in major urban centres.

Despite these factors, it would be instructive for credit unions to understand their share of wallet performance relative to those in their local markets.  The following factors may be the reason behind superior share of wallet performance:

  • Superior sales and service capability:  Sales capability within a share of wallet context is about earning the right to your members business through timely and relevant advice and offers and then asking for the privilege to be their primary banker by, for example:
    • Proactively helping members to customize their everyday banking to their needs to reduce fees and improve savings returns.
    • Helping members to structure their borrowings to their current and future needs to maximize affordability and reduce interest costs.
    • Helping customers to construct their savings and investments to address their needs for liquidity, returns and tax position within risk parameters with which they are comfortable.
    • Special offers to consolidate such as new money deposit offers, mortgage switch offers etc.
  • Competitive Pricing:  There is a relatively small portion of the market who will undertake the effort to optimize each element of the personal financial affairs, but there are certain products and situations where the financial incentive is sufficient to justify the effort.  These include, for example, mortgage financing, auto financing, large ticket GICs and high rate savings account.  Primary customers may not expect the best rate from their primary financial services provider, but they expect rates to be reasonably competitive.
  • Fair Dealing:  For most customers, financial services is a low interest category that once properly set up will be neglected until some event forces their attention.  These events could be a significant service failure, mortgage and GIC maturity or a major change in their situation such as marriage, family formation, divorce, job loss or death.  Credit Unions that deal with these situations professionally and fairly build long term loyalty.  Similarly, failure to address customer needs well could result in loss of trust and expose the relationship to switching.

If share of wallet growth is a key part of your strategy, we can help.  Our branch market share reporting service addresses share of market and share of wallet right down to the branch level.  Let us know how we can help.