BOSTON–The battle for share of wallet isn’t just limited to the consumer market, with the same fight taking place in the small- to medium-sized business market, as well, and it’s “heating up,” according to a new analysis that has found credit unions “possess unique strengths that position them as powerful contenders.”

Understanding what those advantages are and then strategically enhancing those offerings can enable credit unions to not only attract new SMB relationships but, “critically, to retain their coveted top-of-wallet status, ensuring their cards are the first choice for business owners,” according to a new report from PYMNTS Intelligence that was conducted in collaboration with Velera.

The findings are included in the report titled, “Credit Union Innovation Readiness Index: The Path to Top-of-Wallet Conversion.” It draws on insights from surveys of more than 12,000 consumers and 2,000 U.S. SMBs conducted in late 2024 and “highlights that CUs demonstrate strong top-of-wallet conversion rates among select business segments,” according to the organizations.

Among SMBs overall, credit unions achieve a 53% top-of-wallet conversion rate, outpacing digital-only banks, which convert 42% of their cardholders, PYMNTS Intelligence and Velera reported.

“CUs are particularly effective in converting SMB cardholders in small towns and rural areas, reaching a significant 71% rate,” PYMNTS Intelligence and Velera said in announcing its findings. “They also perform well among micro-SMBs with annual revenue below $250,000, showing a 68% conversion rate across geographies.”

Appeal for the Newest Firms 

Among other findings from the research, according to the organizations:

• Newer businesses, operating for fewer than five years, exhibit the highest top-of-wallet conversion rate with CUs at 60%. “These findings underscore CUs’ existing foothold and opportunity for growth within specific SMB niches,” the companies said.
• While economic incentives like rewards, lower interest rates or fees are often the primary drivers for top-of-wallet card choice across financial institutions, the sources reveal a nuanced picture for credit union cardholders. Among SMBs who primarily use a card from a CU, 44% cite economic incentives as a key driver, the research found.
• Spending control and tracking features are a powerful motivator for 20% of these SMBs, making them the second-most important feature behind rewards. “This is comparable to or slightly higher than the importance placed on these features by SMBs using cards from national or digital-only banks,” PYMNTS Intelligence and Velera stated. 

How SMBs Use Cards

In addition, the two companies said the report also sheds light on how SMBs use their CU cards. 

For SMBs with primary accounts at a CU, 23% most often use their CU-issued card to cover basic operating costs, the report found. 

“This differs from SMBs favoring national banks, who more frequently cite inventory purchases (26%) as their most common expense,” the analysis states. “This reinforces the role of credit union cards as financial lifelines for managing core business operations.”

The Recommendations

To attract new top-of-wallet relationships and retain existing ones, PYMNTS Intelligence and Velera are recommending that credit unions consider strategic enhancements to their SMB card programs. 

The recommendations include:

• Acknowledging that SMBs often prioritize economic incentives, credit unions should refine their rewards programs to be competitive with national and regional banks.
• Introducing targeted rewards or discounts specifically on essential business expenses, such as inventory, could significantly increase SMB engagement and boost top-of-wallet status, particularly given that inventory purchases are a common expense type.
• Beyond rewards, the strong preference for spending control and tracking tools among current CU cardholders presents a key retention opportunity. 
• Prioritizing advanced features like real-time transaction alerts, customizable spending limits and dedicated mobile card management apps resonates strongly with credit union cardholders and can differentiate CU offerings in the market.

A Dual Strategy

“The path forward involves a dual strategy: refining competitive financial incentives, potentially targeting rewards to common business expenses like inventory, while simultaneously doubling down on the spending control and tracking features that deeply resonate with their existing SMB base,” the report states.