It’s Not Them, It’s You: Bad Attitudes Credit Unions and Community Banks Should Ditch in 2025
Smaller financial institutions are facing a reckoning as customers — particularly younger ones — contemplate breaking up with "bad banking." According to Pinwheel's survey of 500 banking customers, community banks and credit unions must shed three damaging attitudes to retain relevance: assuming customer loyalty is guaranteed, viewing technology as merely a cost rather than an investment, and believing customers won't notice fees.
By Mark B. Egan
Too many people feel like their credit union or community bank takes them for granted—like a longtime friend who only calls when they need something. And when a relationship starts feeling one-sided, it’s only natural to start looking for something better. But have you ever considered that your customers would be more likely to stay if you’d ditch some of your bad attitudes?
We hate to be the ones to break it to you but your competitors have noticed your BFF problem. And they’re capitalizing on it. Case in point: A digital-first banking giant recently launched a nationwide marketing campaign — spanning TV, YouTube, TikTok and more — built around a simple concept: "Break Up With Bad Banking." The ads encouraged people to walk away from "unfulfilling relationships" with financial institutions that weren’t treating them right.
For community financial institutions, the long-term relationship problem is especially challenging — and hard to face up to — because they above all should be able to present themselves as friendly alternatives to monolithic megabanks and soulless digital startups. The local, personal relationship is what community banks and credit unions are supposed to be all about! If customer primacy is your goal, it’s essential to cultivate self-awareness.
To learn more about how credit unions can beat back the competition and stay relevant in an increasingly competitive digital world, Pinwheel surveyed 500 U.S. banking customers in January, including one-on-one interviews for deeper perspective. Those responses are included here, exclusively.
The survey from Pinwheel — a technology firm that specializes in helping small financial institutions improve customer experience — revealed three bad attitudes community banks and credit unions should ditch in 2025.
Want more insights like this? Check out Pinwheel’s content portal: Primacy in the Digital Age
Bad Attitude No. 1: They’re Never Gonna Leave!
Let’s start with the good news: community banks and credit unions are holding their own. Pinwheel’s survey reports that — while a majority of people have their primary banking relationship with a national bank — some 46% of consumers have an account with a community bank or credit union.
At the same time, however, 52% of consumers have an account with a digital bank, which are most popular with Gen Z (70%) and Millennials (64%). And some 42% of Gen Z and 36% of Millennials say they plan to switch primary banks over the coming year, according to the survey. (Perhaps not surprisingly, proximity to a physical branch — long an advantage for local institutions over digital banks — is no longer the No. 1 consideration for bank switchers. Instead, "checking account features and rates" top the list.)
While community banks and credit unions may be encouraged by their high market penetration across demographic categories, taken as a whole, the data contains an implicit threat.
For smaller financial institutions, the challenge is in part related to making it easier for account-holders to enable features and connections that help them unify and simplify their finances, while creating stickiness for institutions: In the survey, 68% of respondents said that they had opened an account they never used. "Our research is clear that people want to consolidate their financial lives into a single, primary account," said Pinwheel CEO and co-founder Kurtis Lin. "And yet — even as consumer expectations for this level of service rise — they struggle to achieve their goal."
Bad Attitude No. 2: Technology Is a Cost (Not an Investment)
Spending money on technology to address your institution’s goals and shortcomings is no longer a luxury, it’s vital. For 35% of consumers earning more than $150,000 across age groups, "quality of digital experience" is what matters most in a banking relationship, according to Pinwheel. It’s also the top criterion for Millennials (40%) across all incomes.
And if you’re prioritizing pain points, you might do well to invest in making it easier for customers to change their direct deposit and recurring payment settings. Thirty-nine percent of respondents said they felt overwhelmed trying to switch recurring payments, while 29% found it frustratingly difficult to move a direct deposit when opening a new account.
Meriwest Credit Union is one institution that has adopted such priorities. Gene Fichtenholz, Meriwest’s vice president of digital strategy, said the credit union is in the midst of an initiative to reduce friction. "We’re working to establish account primacy by making it easier to bring over direct deposits," he said. "We want to be the primary financial hub for our customers, with deeper engagement, larger balances, and expanded share of wallet — and an enhanced overall experience."
Bad Attitude No. 3: The Customer Won’t Notice That Fee
In the age of subscription management services, customers today are eagle-eyed when it comes to fees. Indeed, Pinwheel’s survey found that 30% of consumers pay for such a service (at a cost of $5 to $15 monthly) with half saying they would switch to a credit union that offered them an embedded subscription management service.
Rather than nickel-and-diming customers for fees, Meriwest’s Chief Technology Officer Lina Hess says she has been investing in an artificial intelligence-enabled recommendation system to tailor products for each member. That approach, she said, has tripled the credit union’s campaign conversion rates such that at least 10% of customers now choose additional products when opening an account.
That suggests that rather than trying to load up members with fees, credit unions would be better off investing in technologies that make it easier for new customers to open and manage multiple products at once.
The reality is that credit union and community bank customers do notice when things aren’t quite right in their financial relationships, and digital-first innovators and big nationwide banks are ready to pounce. Still, Pinwheel’s survey shows that having the right mindset about investing in technology and a great customer experience can set a small financial institution apart and give it a fighting chance of retaining customers and even gaining primacy.
