MILWAUKEE—A new study suggests banks and credit unions are approaching a crossroads in 2025--and one big hurdle for CUs is digital transformation.
The Wipfli study, which surveyed nearly 450 C-level executives at financial institutions across the United States, examined the current market challenges facing credit unions and banks, and assessed their long-term growth strategies. `
"This year's findings underscore an industry at a critical juncture — embracing AI and digital transformation while navigating persistent challenges like cybersecurity and talent shortages," said Anna Kooi, Wipfli's financial services practice leader. "Financial institutions that stay focused on strategic goals and leverage data-driven insights are best positioned to lead the way."
The study shows that financial institutions are feeling bullish this year, with 58% anticipating asset growth of 5% or more; last year, only 36% anticipated that level of growth.
“Simultaneously, banks continue to diversify their services to ward off competitors, lure new customers and to capture Gen Zers as they inherit new levels of wealth,” the report states.
“Banks displayed solid strategic priorities, like increasing investments in cybersecurity and growing traction for Banking-as-a-Service and embedded banking. Yet many financial institutions also say net interest margin compression, core deposit growth and the economy/regulatory environment could get in the way of continued growth and market share,” Wipfli said.
Shrinking Margins
"It's critical for banks to integrate their data tools strategically and intentionally," Kooi said. "With shrinking margins, most mid-market banks can't afford costly mistakes from siloed technology decisions. Investing in scalable, pragmatic technology architecture is essential."
In addition, credit union leaders are gaining confidence and are projecting growth in the next 12 months as they “wage a war” to win and retain members, Wipfli said.
Over half of surveyed credit unions are increasing their investments in cybersecurity, as 49% of credit unions experienced an increase in fraud in 2024, with 76% identifying unauthorized access to their networks or data in the past year.
Despite its strategic importance, only half of credit unions surveyed said they have reached a mature state of digital transformation in terms of digital customer experience and engagement. Credit union leaders listed difficulties in integrating with existing systems and data/cybersecurity concerns as barriers to realizing digital maturity, the report shows.
The banking industry survey was based on responses from 345 financial institutions across the United States, and the credit unions survey had 106 credit unions respond.