Soft switching is why your retention numbers don’t match your balance sheet

Credit unions are not losing members in the way traditional churn metrics would suggest. Accounts are seldom closed, complaints remain limited, and satisfaction scores generally hold steady, yet many institutions continue to face weak deposit growth, uneven account usage, and a widening gap between account ownership and where financial activity concentrates.

Members are opening accounts with fintechs and megabanks while maintaining their credit union accounts. Over time, paychecks, bill payments, and everyday transactions move to the new institution, while the credit union account remains active in name but peripheral in practice. This behavior, commonly referred to as soft switching, allows members to change their primary financial relationship without ever formally leaving.

Research highlights how common this has become. J.D. Power found that 72% of consumers who opened a new checking account did so at a different institution than their existing primary. More than half of those consumers subsequently made the new account their primary relationship. From the credit union’s perspective, the member was retained. From the member’s perspective, the decision had already been made.

Soft switching is not new, but several forces are making it more frequent and more consequential.

First, fintechs have removed nearly all friction from opening and using a new account, making it easy for consumers to test a new financial relationship with little effort or commitment. Account opening can be completed in minutes, funding is straightforward, and incentives are delivered immediately, lowering the barrier to trying a new provider without requiring a definitive decision to leave an existing institution.

Chime illustrates the impact of this model. In fact, Chime captured approximately 13% of all new U.S. checking accounts, more than any bank, with Chase ranking second at roughly 9%. Chime’s growth has been driven by practical features designed to facilitate early money movement, including early access to direct deposit, overdraft buffers without fees, and mobile-first money management. None of these requires consumers to close their credit union accounts. They only require them to redirect a single behavior, often a paycheck.

Second, megabanks have narrowed the historical gap between trust and convenience. Large institutions are pairing established brands with aggressive incentives and modern digital experiences to secure primary relationships.

Chase has leaned heavily into deposit-driven acquisition, frequently offering sign-up bonuses tied directly to direct deposit. Capital One has taken a broader approach by investing directly in fintech capabilities. Its announced $5.15 billion acquisition of Brex reflects a push to integrate modern financial platforms and expand how customers manage payments, cards, and cash flow. For consumers, the tradeoff between scale and innovation has largely disappeared.

Together, fintechs and megabanks have reset expectations, making the act of opening a secondary account feel low risk and the decision to move money early feel increasingly routine.

Soft switching rarely presents as a single, identifiable event. Instead, it unfolds through a pattern of small behavioral changes that are easy to dismiss when viewed in isolation, particularly when traditional account- and satisfaction-metrics remain stable.

The earliest and most consequential signal is deposit redirection. A member keeps their credit union account open but routes payroll or recurring deposits to another institution. Once deposits move, spending and engagement typically follow, which is why industry research consistently shows that capturing direct deposit early is one of the strongest predictors of an account becoming the primary relationship.

Credit union data reinforces this pattern. At Kohler Credit Union, many members who joined through a new account or loan did not reroute their direct deposit from a previous institution, leaving the relationship operationally intact but peripheral in practice.

Over time, that lack of early commitment showed up in predictable ways:

Kohler Credit Union found that members who completed early account actions showed 78% higher debit activity in the first month. By providing a clear onboarding path, members are using their debit cards faster and in higher volumes, underscoring how quickly usage patterns establish whether an account becomes central or secondary.

Soft switching persists in part because it conflicts with how credit unions define success.

Account opening remains the dominant milestone. Once an account is approved and booked, ownership often diffuses across teams. Early inactivity is treated as expected rather than as a signal requiring attention. Satisfaction scores are used as a proxy for loyalty, even though behavior often tells a different story.

Members frequently report satisfaction with their credit union, yet shift deposits and everyday activity to another institution. On paper, the relationship appears healthy. In practice, it is no longer central.

Soft switching is not inevitable. In many cases, it reflects a gap between members' intent and follow-through.

Members often express intent to move deposits, enroll digitally, or begin using their account, but intent alone does not establish primacy. Members who complete direct deposit and bill payment setup during onboarding are more likely to make the new account their primary relationship. Credit unions that prioritize completion over availability report higher balances and usage without increasing acquisition volume.

Soft switching accelerates when a member’s relationship remains narrow. Institutions that identify relevant savings, credit, or lending products early provide members with more reasons to maintain the activity. The risk is not losing the checking account, but failing to expand the relationship before another institution does.

Inactivity is rarely temporary. When deposits do not materialize, debit usage slows, or digital engagement drops, primacy is already at risk. Institutions that treat these signals as prompts for action are better positioned to prevent drift than those that wait for balance runoff or attrition reports.

Taken together, these approaches shift focus from opening accounts to establishing reliable member behavior, which is where primary relationships are ultimately decided.

Soft switching matters because it changes the economics of the member relationship without triggering familiar warning signs.

For credit unions, the question is not how many accounts are opened, but whether the institution is structured to earn and retain the member’s paycheck, spending, and recurring activity, and whether responsibility for those outcomes is clearly owned.

Interested in how credit unions are addressing soft switching and retaining primary relationships? Let’s discuss.