C. Myblog

5,875 – The Number of Credit Unions with Assets Less Than What?

September 9, 2016

Can you guess what this number represents?  You probably would not have guessed that this is the number of credit unions with assets less than the balances held on the Starbucks app and gift cards, which as of the first quarter 2016 totaled $1.2 billion (Source: marketwatch.com).  As a point of comparison, this is more than double the balances held on prepaid cards issued by Green Dot Corporation.  Perhaps even more surprising is that a whopping 41% of all Starbucks transactions are completed using a Starbucks card or their mobile app (Source: marketwatch.com).  Starbucks has announced plans to introduce a prepaid Visa rewards card through a partnership with Chase at the end of the year (the full article can be found here).

In the grand scheme of things, the $1.2 billion balances held by Starbucks, while impressive, is a small piece of the American deposit base, which totals more than $12 trillion (Source: bankregdata.com).  However, the continued disruption of traditional banking should be what gets the attention of credit union decision-makers, as these types of alternatives are growing quickly and are being offered by a more diverse group of companies that generally have had nothing to do with traditional financial services in the past.

It would be a good strategic thinking exercise to consider how these kinds of trends could impact the credit union’s financial structure, both over the shorter-term, but in particular over a longer period of time, such as 3-5 years.

  • How could this impact credit union deposits and liquidity?
  • How could this impact interchange income? Is your credit union’s card being used in the Starbucks app or to load gift cards?
  • Do these shifts continue to impact the way certain segments of the population view traditional financial institutions?
  • What might Starbucks do with the loads of cash they are acquiring?
  • What other questions should you be asking?

Consider not only what the impacts could be to your financial structure, but how could this impact your strategy, and how might your credit union respond to these types of threats?

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