Industry Reports: Credit Unions Face Structural Shift, Not Slow Change

SRM’s new outlook urges faster, smarter strategic action that enhances, not replaces, commitment to member service and connection.

​By Marc Rapport,
Contributing Editor

Key Points

• Structural change is accelerating across industry
• Personalization now drives member retention gains
• Data readiness underpins future competitiveness

SRM has released its latest Industry Outlook Report, offering credit union leaders its read on the forces shaping 2026 and beyond. The research and advisory firm frames the report as a practical guide for navigating a period where change is no longer gradual, but structural.
 
The report points to a convergence of pressures: economic and regulatory recalibration, ongoing consolidation across banks and credit unions, and rapidly shifting consumer expectations. At the same time, competition from fintechs and platform players is intensifying, while AI, real-time data, and API-driven modernization are accelerating the pace of change.
 
“We are living through one of the most profound periods of change the financial services industry has ever experienced,” said Mark Sievewright, until late April the Chief Strategy Officer and Practice Leader, Strategic Advisory Services at SRM.

“The forces reshaping our industry aren’t incremental – they’re structural. This report is designed to give financial institution leaders the clarity and strategic direction they need to not just navigate this moment but to lead through it,” Sievewright said.
 
(Check out Mark Sievewright and Mike Lawson discussing trends at the 2026 GAC.)
 
The new report was researched and written by Sievewright and fellow industry veterans at SRM: Prakash Natarajan, Steve Shaw and Casey Merolla.
 
Merolla is the firm’s President of Community Financial Institutions, with more than 20 years of consulting experience focused on payments, digital strategy, sourcing and operational performance.
 
She works closely with credit unions, issuers, and fintech partners to drive growth and innovation. Below she shares some highlights and insights from the 2026 report.

Casey Merolla

Turning innovation into measurable outcomes

Your data shows that top innovators are investing about 5.6% of assets and seeing roughly half the churn of their peers. What are the first two or three investments a mid-sized credit union should prioritize if they want to see similar retention gains within 12–24 months?

Casey Merolla: The lesson is not that more spending drives better outcomes, but that smarter, member-aligned investment does. Top innovators are investing 5.6% of assets and seeing nearly half the churn of the lowest tier.

That gap matters, but the first priorities for a mid-sized credit union should be investments that modernize the digital experience, improve personalization, and strengthen data readiness. And while all that’s happening, you still have to make sure you’re running your core business well. That includes managing costs, delivering on member expectations, keeping a close eye on fraud, and safeguarding the funds your members have entrusted to you.

Those are not optional. It has to be a both-and, not an either-or. Invest in smarter, more personalized member experiences, absolutely. But don’t lose focus on the blocking and tackling that keeps the institution healthy and trustworthy in the first place.

Moving from “digital-first” to “member-relevant”

The report makes it clear that digital alone isn’t enough – members want timely, personalized guidance. What does a good, personalized experience actually look like in practice for a credit union, and what’s a simple starting point most institutions overlook?

Casey Merolla: Digital access by itself is no longer enough. That’s table stakes. A truly personalized experience is one where the credit union is using what it already knows about a member’s financial behavior to deliver timely, relevant help, whether that’s guidance, protection, or insight.

Our report shows that 84% of consumers would likely switch to a financial institution that offers timely, relevant tips to improve their financial health. That’s a striking number. But here’s the part I think most institutions miss: the answer is not to go collect more data.

The data is already there. The problem is that it’s sitting fragmented across systems that aren’t talking to each other. The starting point is getting serious about the data you already have, finding it, understanding it, and putting it to work to reach members in a more, contextual, relevant way and using it in conjunction with the products and services that you already offer.

That’s where the personalization payoff comes from.

Making data usable, not just available

Many institutions still struggle to activate their data, with fragmented systems and heavy reliance on core providers. What’s a realistic roadmap for a credit union that wants to become data-driven but doesn’t have enterprise-level resources?

Casey Merolla: The roadmap starts with acknowledging that many institutions are still dealing with fragmented environments. In the report, we note that 56% keep data in the system that generates it, 56% rely on their core provider to access data, and 41% are still using spreadsheets to manage data used by business lines.

So, the first step is not trying to become an enterprise overnight. It’s getting serious about data readiness and governance. And critically, before you even start that process, you need to know why you’re doing it.

What do you want to do with your data once it’s clean and accessible? I see institutions come to us all the time saying they have a big data problem, and when you ask them what their goal is, they aren’t sure.

That matters enormously, because reorganizing internal data systems is a long, hard process. If you don’t know what you’re working toward, you might not ever know when you’ve gotten there. Pick a goal, take stock of what you have, and build from there.

Partnering with fintechs without losing control

The shift from “fintech as competitor” to “fintech as collaborator” is a major theme. How should credit unions decide what to build vs. partner for – and what are the biggest mistakes you see in fintech partnerships today?

Casey Merolla: Credit unions first need to get very clear on what they’re actually trying to solve. What’s the strategy? What are they trying to offer? Once that’s defined, the question of build versus partner becomes much easier to answer.

The hardest part about building something in-house is whether you’ll have the capability, focus, funds, and sustained resources to keep developing it at the pace the market demands. There also has to be a compelling strategic or security reason why building in-house makes sense in the first place.

If you can’t answer both of those questions convincingly, you should be partnering. The moment a credit union starts building things internally without clear reasons why, they risk losing focus on the core mission of serving their communities and their members.

On the mistakes side, the biggest one I see in fintech partnerships is locking in too long with too little flexibility. Smaller institutions are used to signing multi-year contracts with traditional vendors, and they carry that mindset into fintech deals. But the fintech space moves fast. Do you really want to be locked into a partner for five years when we cannot predict what the market will look like in two?

Think carefully about duration. Build in checkpoints. If certain metrics change or certain conditions arise, have a mechanism to come back together and reassess. Duration and flexibility have to be part of the conversation from day one.

Competing on experience, not products

You argue that the competitive battleground has shifted to experiences rather than products. What’s one experience improvement that delivers outsized impact but is still underutilized across credit unions?

Casey Merolla: If I had to pick one, it would be proactive financial guidance delivered through the channels members already use every day. The report shows that 48% of consumers log into their financial institution’s mobile app or website daily, and 74% want more personalized banking experiences. That’s a major opportunity to make those everyday interactions more useful, not just functional.

We also need to be realistic about the fact that a small or mid-sized credit union is not going to out-experience the newest fintech. But what they can absolutely do is make sure their digital experience is not so far behind that it takes them out of the running entirely.

And they can use those touchpoints to show up as something a fintech never can: as a trusted community partner who knows the member and has something genuinely useful to say to them.

Navigating consolidation strategically

With accelerating M&A activity and pressure to scale, many credit unions are weighing their options. How should leadership teams think about consolidation not just as survival, but as a strategic lever –and when does it not make sense?

Casey Merolla: Consolidation should not be viewed purely as a survival tactic. It’s really about building the capacity to invest. If it helps you access better technology, deeper talent, stronger analytics, and more capacity to modernize, then it can absolutely be a strategic lever.

Where it does not make sense is when the deal is driven only by size. Consolidation is not a strategy by itself. It only works when it’s tied to a shared vision and a stronger value proposition for members.

This is something I watch closely, because M&A has been picking up and is likely going to continue accelerating. Every institution, whether they’re thinking about being acquired, doing the acquiring, or staying independent, needs to be thinking about that intentionally right now. That decision should be driven by strategy, not circumstances.

Payments as a growth engine, not a utility

The report positions payments as the front line of the member relationship. What are the most practical ways credit unions can turn everyday payments into deeper engagement and revenue – not just transactions?

Casey Merolla: U.S. consumers now average 48 payments per month, which means payments are not a back-office function anymore. They are one of the most frequent ways a member experiences their institution.

in all my years in this industry, I’ve never seen a new payment method replace an existing one. Every new option, whether it’s faster payments, digital wallets, or something else, simply adds to the mix. It creates another lane rather than taking one away.

Balancing AI with the human relationship

AI is advancing quickly, but you emphasize that the goal is to enhance, not replace, human connection. Where should credit unions deploy AI first to create real member value without eroding trust?

Where I think credit unions should start deploying AI, and where I’ve seen it create real value, is in fraud management. Consumers are genuinely comfortable with AI being used for advanced fraud protection, and the report reflects that.

I’ve done a lot of fraud work over the years, and I can tell you that AI tools are changing what institutions can detect and prevent. The challenge is that the fraudsters have access to those same tools. So, it’s an ongoing arms race and staying current matters.

On AI broadly, the goal has to be to enhance the people you have, not replace them. How do you use these tools to make your staff more responsive and more useful to members? That’s the right question. I don’t like AI as a replacement for human relationships. I like it a lot as a way to free people up to spend more time on the things only they can give: advice, empathy, being a trusted presence in the community.
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Winning with constrained consumers

The report highlights growing financial stress among key segments, especially younger households. How can credit unions turn this challenge into an opportunity to deepen relationships and become more essential to members’ financial lives?

Casey Merolla: This is a real relationship opportunity for credit unions if they respond the right way. One in four millennials, Gen Z consumers, and households with children under 18 are under sustained financial stress. And this is exactly where a community financial institution has a genuine advantage.

One of the biggest value propositions a credit union has, compared to a large bank or a fintech, is that sense of being in the community together. Not just a service provider, but a partner who knows the member and is invested in their wellbeing.

When someone is under financial stress, that is precisely the moment they need more than a product. They need guidance, empathy, and they need an institution that feels accessible and trustworthy.

Credit unions that lean into that and show up proactively for stressed members, with relevant outreach and genuine support, are the ones that will deepen those relationships rather than lose them.

The institutions that miss this opportunity are the ones that stay silent or continue pushing generic promotions. That is not what a stressed member needs, and they’ll notice the difference.

What to stop doing

Given all these structural shifts – technology, competition, consumer expectations – what’s one strategy or mindset that credit unions should abandon today because it no longer works in this environment?

Casey Merolla: Move away from the idea that when you select a vendor or partner, you’re selecting them for life. There’s still real value in trusted, long-term vendor relationships, and I’m not saying throw that out. But you have to be willing to recognize when the market is changing and when it may be time to consider something different.

I understand the tension, because credit unions are fundamentally relationship-driven. But the way you actually honor loyalty to your members is by always delivering the best possible experience and service. If that means bringing in a new partner to fill a capability gap, that’s not a betrayal of your values.

 Serving your members well is the mission. Everything else, including which vendors and partners you use to do it, should be in service to that goal.

This interview was edited and condensed.

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