AI Gives Smaller Credit Unions a Shot at Bigger Growth

Credit unions have traditionally played to their strengths.

These community lenders built their competitive identity around trust, local roots and personal service. The pitch was relational. Credit unions offered a more personal alternative to national banks.

But new research suggests the terms of that relationship are changing. Perhaps permanently.

Findings in “Built to Lead or Losing Ground? AI, Mobile and the Member Retention Imperative for Credit Unions in 2026,” a PYMNTS Intelligence report produced in collaboration with Velera, show that AI, digital onboarding and mobile-first tools are no longer side projects. They are becoming core determinants of member retention, growth and long-term relevance.

The strongest signal in the report is not simply that consumers like AI-enabled banking. It is that the consumers most likely to leave a credit union are the ones who want those capabilities most.

How AI Is Becoming the New Member Retention Engine for Credit Unions

Credit unions deploying conversational AI, frictionless onboarding and predictive financial tools are outperforming peers on member growth and asset accumulation, per the report. Institutions slower to modernize are starting to show signs of measurable member attrition.

That finding reframes the digital transformation debate. For years, financial institutions discussed AI through the lens of operational efficiency — automating workflows, cutting support costs and improving fraud detection. The new findings point to something more consequential. AI is becoming customer infrastructure.

Gen Z respondents were 73% more likely than the average consumer to want AI-powered financial advice. That points to a generational shift in how consumers define relationship banking. Historically, relationship banking meant human interaction — branch managers, local service and direct personal engagement. Younger consumers appear to define it differently. They expect financial institutions to be always available, context-aware, personalized and digitally seamless.

Credit unions have historically competed within a compressed technological landscape, where digital capability gaps were noticeable but manageable. AI may widen those gaps faster than prior generations of financial technology. Deployment speed itself creates competitive leverage.

Read the report: Built to Lead or Losing Ground? AI, Mobile and the Member Retention Imperative for Credit Unions in 2026

Why FinTech Partnerships Are Driving AI Adoption at Credit Unions

FinTech vendors are becoming the hidden operating systems behind modern banking experiences. Conversational AI, instant card issuance, onboarding infrastructure, fraud management and embedded payment tools are increasingly supplied by specialized third-party platforms rather than built internally.

Among top-tier credit unions, 76% said external partners were helping deliver digital onboarding and authentication capabilities. Another 73% reported using partners to develop new payment user experiences.

This partnership model matters most for AI deployment. Most institutions cannot realistically build sophisticated AI systems on their own. The economics and complexity of internal AI development remain prohibitive for many regional financial institutions.

Why Mid-Sized Credit Unions Are Outpacing Larger Institutions on AI Readiness

One of the report’s more surprising findings is that size does not determine innovation readiness. Credit unions with between $1 billion and $5 billion in assets outperformed those with more than $5 billion in average innovation readiness scores.

Mid-sized institutions appear to occupy a strategic sweet spot. They are large enough to invest in innovation and nimble enough to deploy new tools quickly. Larger institutions, by contrast, often face the burden of integrating new technology into legacy systems, layered governance structures and fragmented tech stacks.

The winners across financial services may not be the institutions with the biggest technology budgets. They may be the ones that move fastest, partner smartest and align digital capabilities most closely with changing member expectations.

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At PYMNTS Intelligence, we work with businesses to uncover insights that fuel intelligent, data-driven discussions on changing customer expectations, a more connected economy and the strategic shifts necessary to achieve outcomes. With rigorous research methodologies and unwavering commitment to objective quality, we offer trusted data to grow your business. As our partner, you’ll have access to our diverse team of PhDs, researchers, data analysts, number crunchers, subject matter veterans and editorial experts.