America’s smallest financial institutions are innovating in financial products and services for their members. Even pint-sized credit unions are accelerating their digital journey to meet consumer expectations for everything from buy now, pay later (BNPL) programs to mobile apps for credit cards for your teenagers.
A forthcoming report, “Credit Union Innovation Readiness: The Smallest Step It Up,” a collaboration between PYMNTS Intelligence and Velera, shows how expansion into cutting-edge financial products and services is no longer the exclusive trajectory of Wall Street banks or the largest credit unions.
The report, based on a survey of 500 credit union executives conducted from Oct. 11 to Nov. 22, 2024, reveals a dramatic change. The share of credit unions lagging on innovation plummeted to 15% from 55% in just a single year.
The turnaround isn’t just about catching up; it’s about reshaping the future of financial services across the nation’s more than 4,400 credit unions and 142 million members. The upshot: The shift is leading to a more level playing field where performance isn’t solely dictated by the highest assets. Size doesn’t matter like it used to.
Among credit unions with less than $500 million in assets, the share falling behind on innovation plunged 40 percentage points over the course of year. While none of these smaller institutions were classified in November 2023 as “early launchers” ready to jump on new innovations first, their share spiked to 8.5% within 12 months.
Intriguingly, the report reveals that the largest credit unions with over $5 billion in assets have adopted a far more measured approach. Their share of “early launchers” saw a considerable decline, shrinking by roughly three-quarters from 32% to 8.1% in one year. While none were considered innovation laggards a year prior, 2% fell into that category by November 2024. Like a college basketball team nobody’s heard of that makes it to the top brackets during March Madness, many smaller credit unions are beating their larger cousins at the innovation game.
The Great Leveling
A key area of focus has been faster digital payments. Real-time payments were the most common product addition between November 2023 and November 2024 across all asset tiers. The smallest credit unions saw a 71% increase in offering instant payments, while those between $500 million and $1 billion saw an 83% increase. Larger institutions also saw substantial jumps. Same-day Automated Clearing House (ACH) transactions were also widely added by both the smallest and largest credit unions.
Beyond these core payment products, innovation priorities diverge based on size. Smaller institutions have focused on adding contactless debit and credit cards, alongside student loans. The largest credit unions, however, have prioritized BNPL, regular ACH and young adult and teen debit cards. Meanwhile, for all but the largest credit unions, open banking was the most-added feature. The smallest credit unions also prioritized mobile wallets and mobile credit card apps.
In contrast, the largest credit unions demonstrated a strong push into more advanced features. They saw the greatest increase in offering planning/budgeting tools and boosted their cross-border/multicurrency capabilities. A major focus for the largest players was also artificial intelligence (AI) innovation, with the share offering AI-operated chat/customer support surging by 57%. The report suggests these differences might be because larger credit unions have already matured their mobile payment offerings, allowing them to focus on other service areas.
One takeaway: Limited size doesn’t equate to limited potential. Success in the fiercely competitive financial services landscape hinges on making timely, strategic moves that align technology goals with consumer expectations. Staying competitive means staying current with both technology and member demands, with speed and convenience the trump cards.
Read more:
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