The Omnichannel Imperative: Why Credit Unions Need Both Digital and Physical to Thrive

As digital banking becomes normative, credit unions (CUs) are at a crossroads. Their long-standing mission is rooted in local, in-person service—yet, as a June McKinsey article notes, the “digital imperative” is now unavoidable. Branch closures underscore the challenge of balancing efficiency and cost-cutting with community presence. Despite members’ continued preference for in-person service, ever-growing segments—especially Generation Z and small- to medium-sized businesses (SMBs)—expect digital onboarding, mobile cards and frictionless tools alongside trusted face-to-face service.

What’s emerging is clear: For credit unions, the digital imperative is really an omnichannel one. Meeting members where they are—online, in-app and in-branch—is no longer optional. Top-performing credit unions are delivering relevance, innovation and loyalty through a seamless mix of channels.

• Digital Expectations Now Drive CU Member Retention
• Top-Performing CUs Lead With Precision Innovation
• Branch Access Remains Core to Member Value
• Win Loyalty With the Right Tools in the Right Channels

Digital Expectations Now Drive CU Member Retention

Those leaving their credit unions aren’t just searching for better rates—they’re also seeking better digital experiences. Digital onboarding is now a top expectation among SMBs, millennials and recently departed members.

Digital lag slows growth—and costs loyalty.

Digital onboarding drives switching behavior.

Among SMBs that left a CU for another FI, 68% said they preferred digital onboarding when applying for new banking products—as did 48% of consumers and 52% of millennials. For these members, branch access alone isn’t enough.

Notably, 63% of top-performing CUs now offer digital onboarding, compared to just 25% of bottom performers. Digital onboarding consistently drives deeper engagement and increases the odds that members will go all-in with their credit union. The segment’s leaders are building portfolios around relevance, not volume—cutting underused features and doubling down on high-impact digital touch points like onboarding.

Top-Performing CUs Lead With Precision Innovation

Gen Z consumers aren’t just shaping future banking services—they’re demanding them now. Top-performing credit unions are targeting high-impact features that match digital-only expectations.

Top performers target features that matter most.

Gen Z raises the bar for feature-focused innovation.

Top-performing credit unions aren’t innovating for everyone—they’re optimizing for Gen Z, whose expectations are fast becoming baseline across all segments. This cohort is 78% more likely than the average consumer to expect digital onboarding and 67% more likely to value QR code payments. Open banking also ranks 72% higher for Gen Z, suggesting strong interest in integrated financial ecosystems. These expectations redefine what member-centricity means: seamless, mobile, fast and connected. Human service still matters—but only when baked into frictionless digital channels.

Branch Access Remains Core to Member Value

Branch access still matters—especially for longtime members. More than half of CU members—consumers and SMBs alike—prefer in-person service, making branches essential to retention and trust.

Loyal members keep coming back to the branch.

ATMs remain a vital bridge between analog and digital.

Older millennials still rely on ATMs for deposits and withdrawals, with 34% using them multiple times per week. More broadly, 26% of CU members report using ATMs this frequently, and 70% of those cite cash withdrawals as the primary reason. Convenience, after-hours access and self-service rank as top ATM use drivers, making ATM availability critical to member experience.

New branches reinforce member-first strategy.

Despite record closings, the largest CU in the world, Navy Federal Credit Union, opened a new branch at Fort Irwin in March to better serve more than 10,000 members in the area. The expansion—its eighth retail location in the San Bernardino, California, market—supports a growing military community that values on-base financial access. Navy Federal’s move reflects a subtler trend: Credit unions are recognizing the need to reinvest in physical infrastructure to meet members where they are. As Executive Vice President Keith Hoskins put it, “At Navy Federal, our members are the mission…”

Policy moves aim to expand digital and physical access.

As banking evolves, CUs continue to find new ways to fulfill their long-standing mission of personal service. In North Carolina, lawmakers are backing a bill that would allow credit unions to serve rural residents who live more than 8 miles from a bank. State law limits CU membership to specific groups, such as state employees or individuals in certain professions. The proposed House bill would expand eligibility to include individuals living below the federal poverty level and those in communities without nearby bank branches. In some of the state’s poorest counties, about 40% of bank branches have closed over the past decade.

CUs see an opportunity to bridge the gap—not only with physical access but also with better digital tools tailored to underserved communities. This shift could expand membership and reinforce credit unions’ role as a banking lifeline where traditional providers have pulled back—especially for low-income and digitally underbanked populations.

Win Loyalty With the Right Tools in the Right Channels

To stay competitive, credit unions must go beyond adding features—they must align every service channel with evolving member expectations. The future belongs to institutions that meet members where they are—whether online, in-app or in-branch.

Top-performing credit unions aren’t just layering on tech—they’re streamlining experiences to deliver what matters most. This targeted strategy—focused on onboarding, card issuance, open banking and budget tools—helps close experience gaps and build digital loyalty.

To close the gap, credit unions should focus on the following strategies:

• Prioritize high-impact features like digital onboarding, budgeting tools and mobile card apps.
• Invest in seamless digital journeys that win over digital-only Gen Z and SMBs.
• Expand ATM availability with convenient hours and user-friendly features.
• Preserve branch access as a differentiator for cash-reliant and older members.
• Help drive and monitor legislative trends that enable expansion into underserved markets.

The next generation of credit union leaders won’t pick sides between digital and physical. They’ll win by delivering both—flawlessly.

Staying competitive today means more than just adding digital features—it requires aligning every channel with how members actually live, bank and interact. Members want the freedom to move between digital and physical spaces without friction. That’s the power of what we call ‘phygital.’ Credit unions that blend digital convenience with the human touch of branch access are not only meeting today’s expectations across every generation but also setting the standard for trust, accessibility and long-term loyalty.”