NEW YORK--Small-business members may value relationships with credit unions, but digital shortcomings are putting a meaningful share of those relationships at risk, according to a new PYMNTS Intelligence study conducted with Velera.
The November Credit Union Tracker, “Business at Risk: How Credit Unions Can Attract and Keep SMB Members,” found that 38% of small- to medium-sized business (SMB) credit union members said they were at least “slightly” likely to leave their current institution within 12 months. About 22% said they were at least “somewhat” likely to switch, and nearly 12% described themselves as “very” or “extremely” likely to exit, PYMNTS reported.
Among SMBs considering leaving, 75% said their next provider would likely not be another credit union, and roughly 60% indicated they would move to a national, regional or local bank — highlighting competitive pressure from banks as digital expectations rise.
The report points to digital capability as a key differentiator. PYMNTS found that 42% of middle-tier credit unions offered contactless credit and debit cards, compared with 90% of top performers, underscoring a widening gap in technology adoption and member experience.
Geography also shaped switching risk. Small-town SMBs were less likely than metro businesses to say they were “very” likely to leave, but more likely to describe themselves as 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 limited local options may delay, rather than prevent, attrition, according to PYMNTS.
The study found that top-performing credit unions treat innovation as an operational capability, not just a product strategy. About 84% of leading institutions reported relying on consultants, vendors or credit union service organizations to support innovation, versus 64% of mid-tier institutions and 50% of lower-tier peers. Middle-tier institutions cited integration challenges (57%), core system constraints (55%) and compliance burdens (59%) as factors slowing progress.
For SMB members, those internal hurdles translate into real-world friction, from limited self-service to weaker onboarding. PYMNTS reported that 70% of SMBs who switch financial institutions prefer online onboarding for new products, reinforcing the importance of digital-first experiences.
The report concludes that strengthening digital onboarding, open-banking connectivity, mobile tools and real-time functionality could help credit unions reduce churn risk while improving SMB retention and growth, PYMNTS said.