Five things credit unions need to watch in 2025

Most observers of the credit union industry believe the outlook for the space is generally positive heading into 2025, but of course there are headwinds.

For example, the need for skills in technology, data science and innovation means FIs will be competing for scarce talent in 2025. Creating an attractive work environment and offering continuous learning opportunities will be essential to attract and retain skilled employees, said Jim Adkins, Managing Partner of Artisan Advisors.

Additionally, cybersecurity will continue to remain a priority in 2025 as will an ever-changing regulatory environment.

“So, in order to stay competitive, credit unions will need to innovate by continued investment in digital delivery platforms, leveraging customer data to provide more personalized customer experiences, and utilizing fintech solutions for both front-end sales efforts and backroom efficiency improvements,” Adkins told Tyfone.

With that as a backdrop, here are five key issues to watch as the new year unfolds.

President-elect Donald Trump’s new administration’s initiatives seem focused on profound changes in staffing and working conditions at federal agencies. How that plays out for the credit union industry may be pivotal next year, Daniel Prezioso, a partner at Olden Lane, told Tyfone. 

“Can they achieve their governmental efficiency objective in reasonable order, or will this push create disruption that results in even more delay in regulatory matters at least for a time if not longer? This question may be the story of 2025,” Prezioso said.

Second, expect regulatory pressures to ease in favor of a pro-growth posture. Much of the jawboning from the Consumer Financial Protection Bureau should wane, as its influence is likely to be significantly curtailed, Prezioso said.

“Here, we are interested to see whether the industry’s progress in slashing non-sufficient fund fees and overdraft fees will stall,” he said.

And third, credit unions with pending Employee Retention Credit claims—that have been in a holding pattern for many months—should see some movement, as the nominee for IRS Commissioner seems poised to chew through the backlog

This year was a banner year for CU-bank deals, with a record 20 announced as of Dec. 16.

And there will likely be more consolidation in 2025 than in 2024, Michael Bell, an attorney at Honigman who advised several credit unions on bank acquisitions this year, told Tyfone. 

The economics related to operating a financial institution remain unchanged. Said differently, they remain challenging for institutions that do not have scale, Bell said. 

Decreasing margins, inflating expenses and operating costs, costs related to fraud, and costs related to digital banking put great pressure on the balance sheets of small institutions.  

“In addition to economics, succession planning and talent retention and acquisition remain very difficult for smaller financial institutions,” Bell said. “Politically, the winds have changed such that at some point the regulatory winds will also change and we will see ourselves with regulations that are not adverse to consolidation.”

The initial period of the new administration will likely look similar to 2017—executive orders that support a deregulatory environment, a pause on all pending regulations that have not been published or are not yet effective, and a new CFPB director who may be willing to rescind current interpretations of UDAAP, Brandy Bruyere, a partner at the law firm Honigman in Washington D.C., told Tyfone.

Several CFPB rules also face legal challenges such as the credit card late fee rule, the small business data collection requirement, and the open banking rule.

“It will be interesting to see how the Bureau handles this pending litigation, but it is possible the government may decline to defend these rules and perhaps ask for a stay while some of these rules are revisited,” Bruyere said.

One thing is different from 2017 though, and that is that federal courts will no longer defer to agency interpretations of statutes. Where a law specifically directs a regulator to take certain actions, it may be more difficult to roll back that kind of rule.

Where a regulator is operating within discretion under a statute, there is more room for change, but we can expect to see consumer protection groups litigate and argue deregulatory actions are not appropriate, she said.

At least for the time being, the leadership at the NCUA will remain the same, so a consumer protection focus will continue but perhaps be tempered by both executive orders and possible changes in CFPB interpretations.

For example, the NCUA’s most recent Letter to Credit Unions on overdraft/account fees cites various CFPB interpretations of UDAAP. If the CFPB changes those interpretations, the NCUA’s examination efforts will need to shift accordingly as well as the NCUA has no UDAAP interpretation authority, only enforcement for credit unions under $10 billion in assets.

Most membership growth continues to come at the top end of the asset spectrum.

Case in point: While credit unions with assets of at least $1 billion but less than $10 billion saw 6% growth in both loans and membership during the past year, the smallest credit unions—those with less than $10 million of assets—experienced a 7.2% decrease in loans, and membership declined 6.4%.

As credit unions look toward 2025, membership growth presents both significant opportunities and pressing challenges, Sam Brownell, founder and CEO of CUCollaborate, told Tyfone.

One key opportunity lies in attracting younger generations by leveraging modern marketing tactics such as influencer partnerships and social media outreach. Younger consumers are more likely to respond to relatable voices and modern, tech-savvy messaging.

Additionally, instant digital access—like immediate use of virtual cards—can enhance the member experience and provide the "instant gratification" that modern consumers expect.

“On the challenge front, credit unions must address long-standing perceptions that they lag behind banks in technological innovation,” Brownell said. “While some CUs have embraced modern tech, others remain behind, reinforcing this perception.”

Streamlining the member onboarding process is essential; too many CUs create unnecessary friction in account opening due to field of membership and fraud concerns. Leveraging technology for seamless, user-friendly account openings can mitigate fraud risk while also improving conversion rates.

Finally, credit unions should focus on "back-to-basics" growth strategies, according to Brownell. Offering competitive rates, user-friendly digital platforms, and personalized service remain foundational to sustainable growth.

By balancing innovation with excellence in core offerings, CUs can position themselves as a modern, accessible, and compelling alternative to traditional banks, he said.

While banks continue trimming branches, credit unions continue to grow their networks.

Recent NCUA data showed that there were 21,961 credit union branches in the U.S. as of Sept. 30. That was an increase of 47 branches from the end of the second quarter.

Glenn Grau, EVP of Sales at branch design firm PWCampell in Pittsburgh, said the firm has seen a huge pick up recently in its consulting end, especially relating to strategic facility planning. 

“We have more and more credit unions taking an in-depth look at their branch network to determine what is the right avenue,” Grau said. “It starts with a complete review, demographically, physically, brand, and technology of each location, and marries that with individual branch performance and market potential to help determine the course of action for each branch location.”

Grau told Tyfone those reviews can result in anything from doing nothing, to closing, consolidating, relocating, renovating, refreshing or re-branding. 

In addition, a second step to the strategic facility planning process is determining areas for expansion through a complete demographic analysis.

Credit unions need to develop a detailed plan over a 3-5 year period with goals, timelines, responsibilities, priorities and investment, detailing a plan of action between changes to the existing branch network and growth opportunities prioritizing based on need, he said.

Portland, Oregon-based Tyfone is a leading provider of consumer and commercial digital banking services for community financial institutions. At Tyfone, we believe that as credit unions of all sizes continue to merge and acquire, adopting digital banking technologies becomes crucial in maintaining operational continuity and offering an enhanced customer experience to the acquired users.