Safe Deposit Boxes: Profit Center or Loss Leader? Posted by AVCU on 10:26 AM

Those credit unions with safe deposit boxes frequently perceive them as a low-yield “necessary evil” that must be tolerated to remain competitive and serve consumers. The Cornerstone Credit Union League interviewed David P. McGuinn, president of Safe Deposit Specialists in Houston, Texas, who claims that with careful analysis, planning and re-vamping of pricing and procedures, safe deposit boxes can become a thriving profit center within 24 to 36 months. McGuinn's guidance starts with identifying the consumers who will most likely rent boxes, which surveys reveal as:

• Most box renters are 50 years old or older (age = wealth).
• Income level among box renters is 14% greater than the national average, and 42% are college-degreed professionals.
• Box renters are 16% more likely to avail themselves of additional financial services you offer.
• Non-renters are typically younger blue-collar workers with less education and lower income than their affluent counterparts.

According to Cornerstone's interview with McGuinn, the answer to drawing non-renters into the safe deposit fold is to make safe deposit box rental relevant to their particular needs. Offer rates and fees that appeal to a lower income clientele. Train staff to recognize this group and offer box services that are realistic and affordable, but not given away.

Among box renters, according to McGuinn, there are rich opportunities to cross-sell additional financial services. These consumers will most likely express interest in investments, CD’s, annuities and mutual funds and are excellent candidates for a VIP relationship for which they will be willing to pay by maintaining high account balances.

McGuinn also suggests that box rental rates, fees, and policies must be carefully reviewed annually. After surveying the local competition, your current rental rates and fees should be compared and adjusted periodically, the same way other products and pricing are handled.

Box rental rates should be calculated using a ‘vault area occupied’ pricing method. Complete a profit and loss analysis of the entire safe deposit box operation, develop additional ways to increase box rentals and implement at least fifteen additional fees that could be charged. McGuinn also says credit unions should examine all “free box” rental agreements and justify the reasons why rental charges were waived.