BOSTON–Credit unions are quickly closing the “innovation gap,” with even the smallest CUs starting to keep pace with their larger counterparts, according to a new study.

The study, from PYMNTS Intelligence and Velera, found that beyond universal adoption of real-time payments, innovation priorities vary significantly by an institution’s asset size. 

“Smaller credit unions are focusing on mobile payments and cards, while larger ones are investing in AI-powered chat, budgeting tools and cross-border capabilities,” according to PYMNTS Intelligence. “Success is tied to strategic, member-centric innovation that emphasizes speed and convenience, and tailors offerings to different demographics, including younger generations.”

More Than 500 Surveyed

The report, “Credit Union Innovation Readiness: The Smallest Step It Up,” reveals how expansion into cutting-edge financial products and services is no longer the exclusive trajectory of Wall Street banks or the largest credit unions, according to the two companies.

PYMNTS Intelligence and Velera said the report, which is based on a survey of 500 credit union executives conducted from Oct. 11 to Nov. 22, 2024, reveals a “dramatic change.”

A Single-Year Plunge

“The share of credit unions lagging on innovation plummeted to 15% from 55% in just a single year,” the study found, according to the organizations. “The turnaround isn’t just about catching up; it’s about reshaping the future of financial services across the nation’s more than 4,400 credit unions and 142-million members. The upshot: The shift is leading to a more level playing field where performance isn’t solely dictated by the highest assets. Size doesn’t matter like it used to.”

Among credit unions with less than $500 million in assets, the share falling behind on innovation plunged 40 percentage points over the course of year, PYMNTS Intelligence said. 

Ready to Jump

“While none of these smaller institutions were classified in November 2023 as ‘early launchers’ ready to jump on new innovations first, their share spiked to 8.5% within 12 months,” PYMNTS  Intelligence reported.

It added that “intriguingly,” the report also found that the largest credit unions, those with over $5 billion in assets, have adopted a “far more measured approach.”

“Their share of ‘early launchers’ saw a considerable decline, shrinking by roughly three-quarters from 32% to 8.1% in one year,” PYMNTS Intelligence reported. “While none were considered innovation laggards a year prior, 2% fell into that category by November 2024. Like a college basketball team nobody’s heard of that makes it to the top brackets during March Madness, many smaller credit unions are beating their larger cousins at the innovation game.”

The Great Leveling

Noting that key area of focus has been faster digital payments, PYMNTS Intelligence and Velera reported that real-time payments were the most common product addition between November 2023 and November 2024 across all asset tiers. It said the survey found the smallest credit unions saw a 71% increase in offering instant payments, while those between $500 million and $1 billion saw an 83% increase. Larger institutions also saw substantial jumps. Same-day Automated Clearing House (ACH) transactions were also widely added by both the smallest and largest credit unions, PYMNTS Intelligence and Velera found.

Additional Findings

The companies said the survey also found:

• Beyond these core payment products, innovation priorities diverge based on size. Smaller institutions have focused on adding contactless debit and credit cards, alongside student loans. The largest credit unions, however, have prioritized BNPL, regular ACH and young adult and teen debit cards.
• For all but the largest credit unions, open banking was the most-added feature. The smallest credit unions also prioritized mobile wallets and mobile credit card apps, PYMNTS Intelligence and Velera said.
• The largest credit unions demonstrated a strong push into more advanced features. “They saw the greatest increase in offering planning/budgeting tools and boosted their cross-border/multicurrency capabilities,” the organizations stated. “A major focus for the largest players was also artificial intelligence (AI) innovation, with the share offering AI-operated chat/customer support surging by 57%. The report suggests these differences might be because larger credit unions have already matured their mobile payment offerings, allowing them to focus on other service areas.”