Strategic Mergers Help Credit Unions Survive — and Thrive — in a Tough Economy

Credit unions have long occupied a specific market niche within the financial industry. CUs favor more personalized and member-focused services than their bank counterparts but typically operate on a much smaller scale. This market niche has come under threat in recent years, however, as consumers abandon brick-and-mortar banking services in favor of digital banking.

Banks and FinTechs have greater resources and the ability to deploy the digital programs that consumers crave. CUs have a difficult choice: Merge with other CUs into single entities and combine resources or risk large banks and FinTechs overtaking the banking industry. As time passes, more CUs are taking the first option.

The “Credit Union Tracker®” examines why credit unions are merging in record numbers to pool resources and survive in a rapidly changing economic environment.

Around the Credit Union Space

Looming fears of an economic recession have dominated corporate decision-making since the pandemic’s beginning, but some feel these fears may be misguided. The Credit Union National Association (CUNA) said that while interest rates are unlikely to ease anytime soon and savings growth will not meet expectations, it believes the U.S. will escape a recession.

CU members have used credit cards more often in recent months, increasing CUs’ share of the overall credit market. A recent study found that CUs held $75.3 billion in credit card debt as of April 30, up 1.5% from March. This amount contrasts sharply with April figures from 2016 through 2022, which showed an average decline of 0.7%.

The recent increase resulted in an overall credit card debt share of 6.4%, a small amount compared to banks’ share of 91.1%. Nevertheless, this slight shift suggests a healthier economic forecast for CUs than for banks.

To learn more, visit the Tracker’s News and Trends section.

Why Credit Unions Are Merging to Sharpen Their Competitive Edge

The financial industry has become more competitive than ever. Shifting economic conditions and the pandemic’s lingering effects have made digital banking the primary means for consumers to interact with their financial institutions. CUs have traditionally relied on member relationships to compete with their larger cousins, but the move to digital has made these relationships harder than ever to maintain.

This month’s PYMNTS Intelligence examines why CUs are turning to mergers to pool their resources and survive in this rapidly changing environment.

About the Tracker

The “Credit Union Tracker®,” a collaboration with PSCU, examines why credit unions are merging in record numbers to pool resources and survive in a rapidly changing economic environment.