How Credit Unions Became FinTechs’ Best Bet for Scale

An industry once dominated by national banks is being reshaped as FinTechs turn their attention to smaller institutions, with credit unions emerging as the partnership destination of choice.

That shift is not anecdotal. PYMNTS Intelligence data from the latest Credit Union Tracker, produced with Velera, shows that FinTech partnerships with credit unions grew nearly 19% year over year, even as FinTech partnerships with national banks declined by more than 50%. Nearly half of FinTechs now work with credit unions, up from 40% just a year earlier.

Why FinTechs, CUs Find Each Other

The data points to a realignment on both sides of the partnership equation. Credit unions face rising member expectations for digital banking experiences that mirror those offered by digital-first providers, including artificial intelligence (AI) service tools, real-time alerts, biometric authentication and personalized rewards. Building those capabilities internally can be slow and costly, particularly for institutions operating on legacy cores.

FinTechs, meanwhile, are reassessing where their products gain traction.

As large banks invest in building technology in-house, FinTechs report greater success deploying solutions with credit unions that need external innovation and are more willing to adopt it.

The report finds that 48% of FinTechs offering end-user services through third parties now partner with credit unions, while partnerships with national and regional banks continue to fall.

The appeal is mutual. Credit unions gain faster access to modern capabilities without undertaking large-scale core replacements. FinTechs gain access to loyal, high-trust member bases and a differentiated distribution channel where products are not competing against in-house bank solutions.

Innovation Gains, Execution Friction

Despite the momentum, the research is clear that these partnerships are not frictionless. While 42% of FinTechs serving credit unions report no major impediments, the majority cite challenges rooted in slow decision-making, complex regulatory requirements and integration hurdles tied to legacy systems.

Compliance expectations play an outsized role. Credit unions operate under strict regulations covering member privacy, disclosures and risk management, and some FinTechs underestimate the rigor required to meet those standards. Among FinTechs that do not serve credit unions, compliance and regulatory complexity is cited as the leading deterrent after product-market fit.

Still, the data suggests these challenges are not deal-breakers. Partnerships that succeed tend to emphasize early alignment on roles, timelines and member outcomes, coupled with transparency around risk and regulatory expectations.

How Partnerships Are Being Built

The research highlights several consistent ways these collaborations are being forged and where they are focused, demonstrating the how these joint efforts are coming to pass:

Modular modernization: Credit unions are layering third-party solutions onto existing cores rather than pursuing full replacements.

Digital account opening: More than 60% of credit unions prioritize partnerships that streamline onboarding and reduce friction.

Unified digital banking platforms: Partnerships focus on delivering consistent experiences across mobile and online channels.

AI-enabled member service: FinTech tools support chat, call center and service automation without sacrificing personalization.

Transaction controls and alerts: Real-time visibility and controls help meet rising expectations for security and convenience.

Biometric authentication: Partnerships strengthen identity verification while reducing friction for members.

Loyalty and rewards programs: FinTechs help credit unions personalize engagement and deepen relationships.

From Potential to Performance

The report frames the next phase of CU-FinTech collaboration as an execution challenge rather than a demand problem. Credit unions that invest in API readiness, standardized vendor onboarding and clear partnership guidelines are better positioned to turn interest into results.

Credit unions that prepare now stand to enter 2026 with a meaningful advantage. The right collaborations, the research suggests, are no longer experimental. They are becoming a primary engine for modernization, competitiveness and long-term sustainability in the credit union sector.

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.