Key insights:
- Member acquisition cost is a complex metric, including all steps from building awareness to converting prospects.
- Digital channels offer efficiency and growth potential, improving individual branch value and reducing the need for additional branches.
- Compared to building a branch, online account opening is a less costly and more effective way to acquire new members.
How much does it cost to acquire new members? This is one of the most important questions for any credit union, yet the answer can vary widely depending on the channel.
Member acquisition cost (MAC) is a complex metric, including all steps from building awareness to nurturing leads to converting prospects. In this article, we’ll examine the relative efficiency of digital and physical channels so you can make the best choice according to your institution’s goals.
Brick-and-mortar branches are expensive to open and operate. Even once they’re up and running, it can take years to break even. Credit unions typically invest about two to four million on average to open a new branch. Branches then cost an average of $400,000 per year to operate, though costs can reach up to $700,000 per year in urban areas.
How can credit unions continue to grow even as physical branch numbers shrink? One strategy is to supplement existing branch networks with high-performing digital solutions. This omnichannel approach, in which digital and brick-and-mortar resources work together to serve members, has the potential to expand the footprint of each branch, grow accountholders, and improve employee efficiency.
This omnichannel approach, in which digital and brick-and-mortar resources work together to serve members, has the potential to expand the footprint of each branch, grow accountholders, and improve employee efficiency.
Here’s why digital banking works
Consumers today consult an average of nine different sources of information over a 60 to 90 day period when shopping for a financial product. Most of this research occurs digitally. Therefore, it’s vital for your institution to have a user-friendly and brand-consistent online presence. In particular, new members should be able to easily open an account online.
Online account opening (OAO) enables credit unions to acquire a much higher volume of new accounts from a wider geographic range than they could through branches alone. With OAO, your institution should expect to open 20% or more of all new accounts online. For many community institutions, that’s better than their best-performing brick-and-mortar branches. Plus, since a physical branch costs millions of dollars to set up and run, it makes strategic sense to grow your brand by implementing more efficient digital tools.
How to spot a low-performing solution from a high-performing one
OAO is often the first interaction a member will have with your institution, so it’s important to make it count. In particular, it’s key for your OAO platform to be fast and easy to navigate. A high-performing solution will minimize the time and number of steps it takes to open an account digitally. To accomplish this, the best OAO platforms offer:
- A sub-three minute application experience
- Automated KYC and ID verification capabilities to minimize delays due to manual application review
- Instant account verification (IAV) to speed up the funding processes while reducing the risk of fraud
- The ability to save and resume an application at the applicant’s convenience
These measures can help your institution reduce member churn and lower CAC in the long term. In fact, with the ability to onboard more members in less time, OAO and other digital tools can reduce branch density by 34% for credit unions — with no drop-off in member satisfaction.
Discover the most cost-effective way to acquire new members
If you compare the expense of opening a new branch to that of implementing digital account opening, it’s clear which one is more cost-effective. Not only is onboarding new members with digital tools more affordable, it also helps community institutions meet consumers where they are, thus improving member satisfaction.
Ultimately, tools like MANTL offer credit unions a shortcut to reduce MAC, boost digital presence, and make the most of every marketing dollar. To discover an OAO solution that can onboard members in three minutes or less, schedule a demo with MANTL today.
