In recent years, credit unions have had to fend off competition on multiple fronts: not just national banks, but a rising wave of online banks. Digital-first competitors are capturing attention and winning accounts with sleek apps, instant approvals and hyper-personalized services. Seven out of 10 Gen Z consumers now opt for online banks (though not necessarily as their only or primary financial institution).
Still, credit unions hold powerful advantages that resonate across generations: trust and community connection.
According to the 2025 J.D. Power U.S. Credit Union Satisfaction Study, credit unions outscore retail banks by a wide margin in areas like trust, people and problem-solving—arenas where they also hold the edge over online-only banks. Plus, nearly half of rural small businesses choose local banks or credit unions thanks to their personal service.
For community financial institutions, the path forward isn’t about copying online banks. It’s about continuing what they do best—building relationships—while enhancing the member experience with digital tools, smart technology and strategic partnerships. By blending innovation with tradition, credit unions can strengthen loyalty, serve members more effectively and stay competitive in a digital-first world. Here are four key ways to make that happen.
1. Capitalize on the Human Advantage
Despite the hype around online banks, consumers still value credit unions’ personalized, face-to-face service and the peace of mind that comes with knowing help is available in person when needed.
In fact, a recent survey found that 52% of consumers visited their primary branch in the past year, and 69% say they’d prefer a branch within 15 minutes if they switched financial institutions. Over half of Baby Boomers and Gen X consumers want to go into a branch to resolve issues, and over a third of Millennials and Gen Z feel the same way. Online banks can’t compete with that.
Additionally, credit unions need to build relationships within their communities. Partnering with local organizations, schools or chambers of commerce can strengthen community ties, expand financial education and remind members and small business owners why they chose a local establishment.
So, while online banks may get a lot of attention, many consumers and businesses still prefer financial institutions that know them by name. The challenge for credit unions is to keep building these relationships while modernizing their digital capabilities.
Drive impact by putting people at the center of progress.
2. Meet Digital Expectations
Digital-first competitors have set a high bar for convenience. From instant loan approvals to mobile-first platforms, fintechs and online banks offer speed that many community financial institutions have struggled to match. In response, the latter are getting on board with emerging technologies, starting with artificial intelligence (AI) and machine learning.
Adopting these technologies doesn’t mean eliminating relationship banking. It means giving staff the time and resources to deliver even better, more personalized service. For example, automated underwriting can cut loan approval times from days to minutes, freeing staff to help members rather than process paperwork. Access to immediate cash helps members meet short-term liquidity needs and small businesses better manage cash flow, stay competitive and make ends meet during tough times.
The future of community banking belongs to those who can combine technology with their core strength: human connection.
3. Embrace Artificial Intelligence
AI is quickly becoming a key tool in modern banking. In 2025, it’s estimated that more than 90% of North American banks use AI-powered chatbots in customer service, and 72% of financial institutions are still increasing their AI spending. For credit unions, AI offers a way to scale services, reduce costs and deliver experiences that rival online-only banks and larger financial institutions.
For credit unions, AI is already making an impact in the following areas:
- Customer support: Chatbots and virtual assistants provide 24/7 answers to basic service requests, costing an average of only $0.11 per interaction compared to an average of $6 for live agent support.
- Personalized engagement: With predictive analytics, AI can deliver tailored messages, anticipate member needs and offer proactive guidance, deepening trust and loyalty.
- Fraud prevention: AI-driven monitoring systems can help credit unions identify up to 95% of suspicious activity in real time, protecting members and the institution alike.
- Automated underwriting: By reviewing loan applications, AI can speed up approvals, increasing member satisfaction while minimizing risk to the financial institution.
While online banks often use AI to automate banking processes, credit unions can use it to amplify human strengths. By equipping staff with better insights and freeing them from repetitive work, AI can make every interaction more personal, relevant and valuable, turning technology into a relationship-builder rather than a replacement.
Work smarter with technology that learns alongside you.
4. Collaborate with Fintech Experts
One of the biggest hurdles credit unions face is resources. Unlike large national banks, they don’t always have the budget or technical expertise to develop and implement digital solutions in-house. Strategic partnerships can help level the playing field.
Collaboration with fintech experts gives credit unions affordable access to the latest banking technology, like digital engagement solutions, dynamic overdraft programs and fully automated, tiered debit card rewards. By working with third-party experts who have proven results in the industry, credit unions can adopt solutions faster and at a lower cost than going the DIY route, optimizing budgets.
When evaluating partners, credit unions should look beyond just technology. In a recent survey of community banks, trust, service quality and compliance topped their list of priorities when evaluating potential partners. The key is finding companies that blend innovation with reliability.
Winning Against All Odds
Staying competitive among the many online banking options requires credit unions to blend modern convenience and innovation with the personal service that has always set them apart. Digital tools improve speed and efficiency, but lasting loyalty comes from the human touch.
While online banks will continue to grow, they don’t have a monopoly on innovation. By pairing smart digital investments with community trust and strategic partnerships, credit unions can offer an even better option: fast, modern and personalized financial services backed by real people who understand and support their members and communities.
See how Neighborhood Credit Union implemented seamless digital solutions for account referrals, engagement and short-term liquidity that increased growth and reinforced its role as members’ primary financial institution—all without taxing its internal team or budget.
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Charles Baker, Director of Client Service
Charles brings with him over 26 years of executive level sales, client services and operations experience in the banking, technology, and consulting services industries. As the Director of Client Service for CSI’s Velocity team, he oversees a team of client service managers in delivering and optimizing Velocity solutions. He works closely with not only his team and the clients, but all Velocity product owners and steering committees. Since Charles’ responsibilities touch on all aspects of CSI’s Velocity products and their deliveries, he works closely with the sales team as a subject matter expert and builds the financial performance models utilized in the sales process to set expectations with the prospective client. He holds a Bachelor of Business Administration degree from Texas State University and lives in Austin, TX with his wife and two daughters.