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Credit unions face two overlapping issues. First, compared to their competitors, they are losing ground digitally. And second, they are not attracting younger consumers. While total loans outstanding have grown about 40% since 2020, according to America’s Credit Unions, the fact remains that banks do significantly better at signing up those born after 1980, a McKinsey & Company survey found. This is particularly critical as the baby boomer share of financial services revenue is projected to decline from 40% industry wide – and more than 50% for most credit unions – to 20% over the next decade.
To address both problems, the most important single thing for credit unions to do is to become more digitally adept; only then will they attract the younger generation, who take seamless online experiences for granted. For example, regional banks, whose profile is similar, make more than 30% of their sales digitally, compared to less than 10% for credit unions, according to our research.
More than 75% of the credit union leaders we’ve spoken with view the digital journey as a challenge. But it is one that needs to be met, both to serve existing members better and to attract new ones.
It won’t be easy. Most credit unions operate legacy loan origination systems that simply cannot deliver a truly modern, automated experience. Just opening an account can be cumbersome. It doesn’t help that credit union websites are relatively unappealing (see exhibit), with less time spent, fewer pages viewed and a weaker “bounce rate” – the share of visitors who leave the site without taking action. Credit union apps, too, are less highly rated than that of banks.
One way to create an intuitive and speedy digital experience with clear performance metrics is to use AI better. Among financial institutions, there are indications that agentic AI is opening new opportunities as they scale pilot use cases. For example, AI tools can spot when members are about to leave and automate the preapproval process, reducing the time and effort required for manual reviews. Generative AI could be used to send personalized nudges to re-engage wavering members or suggest a savings plan or mortgage options for those working on buying a house.
We know such actions can work because they are working already.
One credit union used these and similar strategies to triple digital adoption. Another used digital tools to make buying certificates of deposit easier, offering personalized reminders and real-time assistance – and saw sales increase.
Better digitization may be the highest priority, but it is not the only one. The best-performing credit unions know that they shouldn’t try to imitate megabanks and do everything. Instead, they double down on their distinctive strengths and develop products, services and experiences that offer an authentic experience that fits the needs of specific types of consumers, such as tech-savvy Gen Zers, teachers, military families or small business owners. It's important the chosen segments not be too narrow – that limits the ability to scale – or slow growing. The key is to be both focused and flexible, so that credit unions not only meet the needs of the target but are ready to tap into adjacent opportunities.
This approach is ideal for credit unions, because they typically have a well-defined focus; what they need is a strategy to customize their value propositions. To give just one successful example, a credit union catering to Latino small-business owners streamlined its business loan process and offered bilingual support. These steps helped make the credit union a go-to partner in the community for all kinds of financial services.
One reason the effort worked is that members trust their credit unions – a good basis for a long-term relationship. That is why credit unions should adopt an always-on digital marketing strategy that emphasizes the lifetime value (LTV) of their members. By using data-driven insights, credit unions can deliver highly targeted information – for example, identifying high-potential individuals and then designing offers that that meet their evolving needs.
Finally, more refined communication strategies can help build deeper connections. One credit union doubled the number of credit card accounts opened by sending personalized, prequalified offers to members who had previously ignored generic campaigns.
Credit unions have an excellent reputation and a satisfied customer base. That is a solid foundation; what is needed is a springboard into the future. We estimate that if credit unions can reach the same digital sales level as regional banks, they could bring in an additional $5 billion to $10 billion in revenue, while improving the member and employee experience.
The opportunity is there: If credit unions enhance their digital offerings from the first click onto the website to the completion of a transaction, they can foster deeper connections with today’s consumers – and tomorrow's.
Peter Noteboom is a Senior Partner in McKinsey & Company’s Seattle office.
Atanas Stoyanov is a McKinsey & Company Partner in Miami.
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