BOSTON-—Small businesses may say they value personal relationships with their financial institutions, but many are increasingly willing to switch providers when routine banking tasks still require phone calls or branch visits, according to a new report.
The November Credit Union Tracker, titled “Business at Risk: How Credit Unions Can Attract and Keep SMB Members,” from PYMNTS Intelligence produced in partnership with Velera, found that while most small- and medium-sized business (SMB) members are not actively planning to leave their credit unions, a sizable share is at least open to switching—creating what the report described as meaningful retention risk.
‘Key Dividing Line’
Digital convenience has become the key dividing line. SMBs now evaluate their financial institutions much as they do consumer apps, the report said, and many credit unions fall short of those expectations. That gap affects not only satisfaction but also decisions about where businesses place payroll, credit needs and daily cash-flow management.
In the 12 months after being surveyed, 38% of SMB credit union members said they were at least “slightly” likely to leave their current institution. About 22% said they were “somewhat” likely to exit, while nearly 12% said they were “very” or “extremely” likely to do so.
Not Looking to a Credit Union
Among SMBs considering a switch, 75% said their next provider would likely not be another credit union. Roughly 60% said they expected to move to a national, regional or local bank.
The report found sharp differences in digital capabilities between higher- and lower-performing credit unions. Contactless credit and debit cards were offered by 90% of top-performing institutions, compared with 42% of mid-tier credit unions.
The Role of Geography
Geography also played a role. Small-town SMBs were less likely than their urban counterparts to say they were very likely to leave, but more likely to say they were slightly or somewhat open to switching. Only 56% of small-town SMBs said they were “not at all” likely to leave, compared with 66% of urban SMBs, suggesting what the report described as “deferred switching” rather than deep loyalty, according to PYMNTS and Velera.
The study emphasized that addressing churn risk requires more than adding new products. The report framed “innovation readiness” as an operating capability shaped by systems, partnerships and execution speed. Among top performers, 84% said consultants, vendors or credit union service organizations were essential to their innovation strategy, compared with 64% of mid-tier institutions and 50% of bottom-tier performers.
Internal challenges, including system integration issues, core constraints and compliance burdens, were cited by a majority of mid-tier institutions.
How Frictions Translate
According to the report’s analysis, for SMBs, those frictions often translate into limited self-service options and weak onboarding. Among SMBs that do switch providers, 70% said they prefer online onboarding for new products.
Closing gaps in digital onboarding, mobile tools, open banking connectivity and real-time functionality can turn retention risk into growth, the report concluded, with success hinging on readiness, early action and making self-service the default.
