In financial services, where the global footprint of megabanks can cast a wide shadow over the operations of local lenders and credit unions (CUs), survival for smaller firms isn’t just about keeping up. Increasingly, it’s about outmaneuvering, outsmarting and often out-caring.
Against this backdrop, winning top-of-wallet status is key for small institutions looking to drive competitive differentiation relative to larger competitors.
The latest PYMNTS Intelligence from the April/May 2025 Credit Union Tracker® Series, “Going for Gold: Winning Top-of-Wallet Status for Credit Unions,” revealed that a growing segment of CU cardholders — consumers and small- to medium-sized businesses (SMBs) — place value on features that help them manage how and where they spend money. Roughly 20% of CU card users cited tools such as real-time transaction alerts, spending caps and mobile card management as important in their decision to prioritize CU-issued cards.
The emphasis on control dovetails with broader consumer trends. In an era of inflation and economic uncertainty, households and SMBs are seeking greater visibility and authority over spending. For many, rewards are nice to have — but financial control is essential.
Small Lenders Are Working on Winning Top-of-Wallet Status
Credit unions stand apart from their big-bank counterparts. Member-owned and nonprofit, they’re structurally designed to serve community needs over shareholder returns. For decades, that mission-driven model often came at the expense of scale and innovation.
Today, the explosion of FinTech, changing consumer preferences, and the democratization of digital tools have leveled the playing field in unexpected ways.
The PYMNTS Intelligence report found that CUs are gaining top-of-wallet status with Generation Z consumers and SMBs, particularly in rural areas, with 60% of Gen Z cardholders and 71% of rural SMBs preferring CU-issued cards, largely citing personalized service and community trust as their reasons.
These figures indicate a strong preference for institutions that offer localized services and understand the needs of their members.
Credit unions may have a unique opportunity, as they already own the trust advantage. Now, it could be about translating that into tech-enabled tools that align with members’ real financial behaviors to unlock the path to broader growth.
High-income consumers and millennials, for example, often prioritize robust rewards programs and seamless digital experiences, two areas where national and digital-only banks have an edge.
However, credit unions have something other banks don’t have: local knowledge and trusted relationships with their customers. These features can help them craft rewards programs that are better able to rival those of larger banks.
SMBs are increasingly using credit cards not just for purchases but as flexible tools for managing cash flow. Sixty-one percent of SMBs using CU cards said these help smooth income and expenses. For nearly one-third, that’s the primary reason for use.
This suggests that CUs aiming to boost wallet share should lean into these utility functions — offering robust, user-friendly digital features that support spending awareness and financial planning.
Although building proprietary tech is often out of reach for small financial services firms, open banking APIs and FinTech incubators are helping credit unions integrate best-in-class tools without massive investments.
Credit unions may not be able to outspend large banks on flashy loyalty perks. However, by zeroing in on control, transparency and real-time insights, they can strengthen their value proposition — and, potentially, unlock a new chapter of member growth.
