The Rewards Gap: Turning Member Interest Into Growth

Rewards Are Becoming Essential to Winning Member Spending

Rewards influence which cards consumers use and which financial institutions they prefer. The opportunity extends beyond program participation to spending and primary banking relationships.

Rewards increasingly influence which cards consumers choose.

The findings suggest that having a credit union card in a member’s wallet does not guarantee that the card will be used. Members may maintain long-standing relationships with their CUs while directing purchases to cards from other institutions that offer more attractive returns. The research finds that 60% of credit union members who use multiple cards do so to maximize rewards or perks. That makes rewards a potential influence on repeated spending decisions, rather than simply an occasional incentive tied to signing up for a card.

The opportunity for credit unions is to make their cards more compelling at the point of purchase. Rewards that align with members’ preferences could encourage greater card use while giving members a more tangible benefit from their financial relationship. The challenge is to offer value that competes with alternatives members already have.

Better rewards could help credit unions win primary financial relationships.

Rewards could also help CUs attract consumers who currently bank elsewhere. PYMNTS Intelligence found that among consumers whose primary financial institution is not a credit union, 32% said better rewards or cashback would make them more likely to choose one for their primary account. Only lower rates or fees, cited by 34%, ranked higher. Among small to mid-sized businesses (SMBs) outside the CU system, 30% identified better rewards as a reason to consider a credit union.

The opportunity extends to people who already belong to a credit union but maintain their primary accounts elsewhere. Among those members, 39% said better rewards could persuade them to make a CU their main financial institution. The appeal also reaches younger consumers: 37% of Generation Z consumers and 36% of millennials who primarily bank elsewhere said better rewards could influence their choice.

These findings position rewards as a potential acquisition and relationship-building tool. A competitive program could give prospective members another reason to consider a credit union and give existing members an incentive to consolidate more of their financial activity there.

Credit Unions Face a Growing Gap Between Rewards Demand and Use

Credit unions have not fully converted member interest in rewards into actual program participation, partly because institutional perceptions of their offerings differ from members’ experiences.

Credit union members use rewards programs far less than national bank customers.

Meanwhile, consumers and businesses in general are signaling that rewards deserve greater attention in financial institutions’ innovation plans. Among consumers who want their financial institutions to innovate, 27% ranked loyalty or rewards programs as the feature they most want them to invest in over the next three years. In addition, nearly one-quarter (24%) of SMBs placed rewards or loyalty programs at the top of their innovation priorities. Consumers ranked rewards ahead of account fraud protection and mobile banking.

The gap between demand and participation points to an opportunity for credit unions to reassess both their programs and how members encounter them. The findings do not establish that a single feature explains the difference, but they show that existing participation remains limited despite substantial interest. Meeting that demand could help institutions give members more reasons to use their cards and engage with their financial services.

Credit union executives may overestimate the strength of their rewards offerings.

CUs face another challenge in determining whether their programs deliver value that members recognize. PYMNTS Intelligence found that 45% of credit union executives said their institution offered better rewards than its biggest competitor. Yet just 14% of credit union members said rewards were an advantage offered by their institution. The 31-percentage-point difference highlights a disconnect between executive assessments and members’ perceptions.

The difference is important because the presence of a rewards program does not necessarily make it competitive. Members must see a meaningful benefit before rewards can influence their card choices or their broader banking relationships. An institution may view its program favorably while members continue to favor other cards when making purchases.

Closing this perception gap calls for attention to the member experience alongside internal measures of program performance. Credit unions need to understand whether members recognize the value being offered and whether that value is compelling enough to change behavior. Simply launching a program or expanding its features may not be sufficient if members do not perceive a clear advantage.

Partnerships Can Help Credit Unions Turn Rewards Demand Into Growth

Credit unions recognize the rewards opportunity, and many are preparing to expand their programs. Outside partners can help translate those plans into capabilities.

Credit unions are preparing to expand rewards offerings.

Smaller institutions have particularly substantial room to expand. Among credit unions with less than $500 million in assets, just 31% currently offer rewards programs, while another 43% intend to introduce them within three years. While these plans could help smaller institutions narrow the availability gap with larger CUs, the results will depend on whether planned programs actually launch and gain traction with members.

The growing emphasis on member engagement also reflects a broader shift in innovation priorities. In late 2024, 36% of credit union executives identified member engagement, including loyalty programs and offers, as a leading innovation focus for the next three years. By May 2026, that share had risen to 53%.

The next challenge is converting plans into programs that members use. Expanding availability creates an opportunity, but the participation gap shows why implementation alone is not the final measure of success. Credit unions will need to offer benefits that members recognize and that influence their everyday financial decisions.

External partnerships offer a path to building and scaling competitive rewards programs.

Building and maintaining a competitive rewards program can require technology, data capabilities and merchant relationships. For CUs that lack the resources to develop every component internally, external partnerships offer one way to expand their capabilities. PYMNTS Intelligence found that 52% of credit union executives open to outside support said they expected to work with external partners on loyalty, rewards or other member-engagement programs.

Smaller institutions show especially strong interest in this approach. Among credit unions with less than $500 million in assets that are open to external support, 58% expect to work with partners. That finding aligns with their plans to introduce rewards programs and suggests that outside assistance could play an important role in making those plans feasible.

Partnerships can give credit unions a route to capabilities they might otherwise find difficult to build independently. They can also help institutions expand their offerings without having to develop every element themselves. The strategic objective, however, should extend beyond getting a program into the market. Rewards must appeal to members, encourage card use and support stronger financial relationships.

For CUs, the opportunity is to pair growing investment in rewards with an approach to implementation that reflects their resources and members’ needs. Partnerships may help make that possible, particularly for smaller institutions seeking to compete more effectively with national banks. The opportunity lies in converting rewards demand into programs that win more transactions and deepen member relationships.

Making Rewards a Measurable Growth Strategy 

Credit unions have an opportunity to use rewards to increase card spending, attract new members and strengthen existing relationships. Capturing that opportunity will require programs that deliver recognizable value, along with implementation strategies that reflect each institution’s resources and goals.

PYMNTS Intelligence offers the following actionable roadmap for CUs looking to improve their competitive standing in the marketplace through rewards innovation:

• Align rewards with member behavior. Evaluate how members choose among cards and develop incentives that address their preferences. The goal is to make credit union cards more compelling for everyday purchases.
• Use rewards to attract and deepen relationships. Consider how competitive offers could appeal to prospective members, younger consumers, SMBs and existing members who maintain primary accounts elsewhere.
• Measure member perceptions. Compare executive assessments of rewards with member feedback and participation. Use the findings to identify where programs fail to deliver a recognized advantage.
• Expand capabilities through partnerships. Assess whether external providers can help build, scale or improve rewards programs, particularly when internal resources are limited.

Credit unions have a clear opportunity to turn rewards from a planned innovation into a more active part of their growth strategy. Programs that reflect member preferences and deliver recognizable value can help institutions compete for both spending and primary financial relationships.