“Over the last 25 years we've gone from around 67 million credit union members to more than 100 million members,” Hampel said. “More people are choosing credit unions as their primary financial institution. Credit unions have done quite nicely over the last 25 years, and I see no reason they won't be able to continue that into the future.”

Despite that optimistic outlook, fintech startups are expected to siphon profits from traditional banking services. According to Goldman Sachs, $11 billion in profits are at risk in the immediate future.

“No credit union service is at more risk than core lending,” concluded the Filene report “Trending: Credit Unions in 2025.” “In addition to the traditional competition among financial institutions, sophisticated start-ups are nibbling away at unsecured loans, mortgages and business loans.”

Peer-to-peer lenders like Prosper and Lending Club have made the borrowing process drop-dead simple. But right now, they're doing it in a market that most banks and credit unions don't really care that much about – personal lending, Ben Rogers, Filene's research director, said. While personal lending is still a part of what credit unions do, there isn't a ton of competitive angst in regard to what P2Ps are doing.

“But the next thing that happens with disruptors is they get really good at one thing and then you move to the next level,” Rogers explained. “So I can see Lending Club, Prosper and everybody else like that getting really good at personal lending and then getting really good at auto lending, and then getting really good at mortgage lending or business lending. And by that time they kind of chipped away at the traditional advantages of everybody else like credit unions and banks. So, I worry that we won't take that threat seriously enough and take the competitors' advantage, which is ease of use, simplicity and convenience, to heart. As soon as we lose our members' hearts and minds on loans, then we're in pretty big trouble.”

Of the $843 billion in consumer loans outstanding, a Goldman Sachs report estimated $209 billion is at risk to move to fintech companies. Though they hold less than 2% of the market today, Goldman Sachs projects the new players could eat up 14% of the market within 10 years.

What's more, while new and used auto loans have been a boom for many credit unions, that market is expected to change over the next 25 years because of two emerging trends.

First, while 88 million millennials are expected to buy cars, they won't own the two to three cars that their parents did. That means the demand for auto loans will decline, according to the Filene report. In addition, the self-driving cars market is expected to reach $42 billion and 25% of the automobiles on the road will be self-driving ones by 2035, according to Barclays analysts.

“I think that the traditional shopping, purchasing and financing model is going to change a lot,” Rogers said. “Credit unions need to think about it because we're still very dependent on auto loans for profitability and when that changes materially and we're not part of the financing that comes behind that, then that would be a big deal for credit unions.”

Another big deal for credit unions and their future for growth is mobile banking, Dean Borland, vice president for Credit Union Resources, said. CU Resources is the service subsidiary for the Cornerstone Credit Union League in Farmer's Branch, Texas, which commissioned the Filene report.

Since 2011, more people, particularly millennials and Generation Z (those born after 1995), have been using their smartphones to check their balances, transfer funds and make payments, according to an annual study by the Federal Reserve. For example, 39% of mobile phone owners used their smartphones for mobile banking in 2014, a rise from 33% in 2013 and 29% in 2012.

Consumers are also applying for loans with their mobile phones.

Last year, CUNA Mutual Group reported one in four credit union members applying for vehicle loans through CUNA Mutual Group's loanliner.com use mobile devices to apply for $4 million in loans daily. Since CUNA Mutual launched loanliner.com in 2011, it has surpassed $2 billion in loan applications.

“Credit unions late into the mobile game are losing more members than they'll ever know about,” Steve Hoke, director of loan growth products at CUNA Mutual, said in a 2014 interview with CU Times. “Those members will move on and they'll never come back.”

Although consumers remain enthralled with smartphones, technology experts have suggested other wearables like smart watches, smart rings and virtual reality devices may someday replace mobile phones.

Whatever that new device is 25 years from now, Borland said the challenge for credit unions is how they will extend their value proposition through technology.

If anything, credit unions have built their value proposition over the years by delivering exceptional and personalized services, particularly through their branches and call centers.

Borland said when members have issues or questions, they'll naturally want to contact the call center.

“When you think about it, the contact center may be the credit union's branch of the future,” Borland said. “A contact center that provides support for these services may be the big value proposition differentiator for credit unions.”

Instant Insights /

What Will Credit Unions Look Like in 25 Years?

Related Stories

Recommended For You