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Cornerstone Advisors’ latest “What’s Going On in Banking” study revealed an increase in banking industry optimism this year due to growing confidence in the economy, expectations of a supportive operating environment for bankers, and hopes for financial institution-friendly regulatory changes.
According to the report released last week by the Scottsdale, Ariz.-based consulting firm, more than twice as many bank and credit union executive respondents were very optimistic going into 2025 as they were going into 2024 – 12% compared to last year’s 5%. More than eight in 10 respondents (83%) were very or somewhat optimistic about 2025, a jump from 60% in 2024.
“This is the 10th year that I’ve been writing this report, and I can say – unequivocally – that survey respondents haven’t been as optimistic about the coming year as they have since 2017, and you know what fueled that optimism,” author Ron Shevlin wrote.
The report’s survey sample included 308 respondents from financial institutions at the vice president level and above – 55% from banks and 45% from credit unions, and 92% of whom work for institutions in the $250 million to $50 billion asset range.
In addition to sharing their 2025 outlook, respondents provided their thoughts on the CFPB’s Rule 1033 and industry competition, as well their financial institutions’ current posture and plans related to deposits; AI; instant payments; Buy Now, Pay Later (BNPL); lending; technology investments and deployments; fintech partnerships and core systems. Here are some of the report’s key takeaways specific to credit unions:
Credit Unions Prioritizing Retail Deposits
Seventy-seven percent of credit union respondents said they are focusing on retail deposits this year, a small rise from last year’s 71%. Fifty-three percent planned to focus on small business deposits in both 2024 and 2025, and 14% will zero in on large commercial deposits compared to last year’s 17%.
To attract and retain deposits, about of half of credit union respondents said they plan to implement pricing strategies in addition to creating or enhancing reward programs, in contrast to banks, which plan to focus predominantly on targeted pricing strategies to retain specific clients.
“Deposits may stabilize with fewer and lower rate deposit offers so we can wean ourselves off of high-rate promo CDs and focus again on growing core deposits,” Jenna Lampson, CEO for the $1.4 billion, Concord, Calif.-based Pacific Service Credit Union, said in the report.
Credit Unions Embracing Gen AI
According to the report, among credit unions, 45% have deployed chatbots, a third have implemented machine learning and 36% are already using generative AI. Looking ahead to 2025, 29% of credit unions plan to implement Gen AI tools for the first time.
Both banks and credit unions see Gen AI agents and tools helping them increase productivity in the contact center more than any other area of business, with 74% of credit unions and 43% of banks planning to bring Gen AI into the contact center. Following close behind for credit unions as areas they see benefitting from Gen AI were fraud management (48%) and lending (46%), while banks plan to implement Gen AI into their back-office operations (41%) followed by fraud management (39%).
A2A Tops Instant Payments Use Case List
According to the study, 45% of banks and 38% of credit unions currently offer instant payments services, however about eight in 10 have only enabled receive functionality. Seven in 10 financial institutions are using the Federal Reserve’s FedNow service, and a third of banks and three in 10 credit unions use The Clearing House’s Real-Time Payments rail.
The top instant payments use case for credit unions is account-to-account transfers (49%), while for banks, it’s B2B payments (47%).
Credit Unions Step Up Fintech Investments
The report called banks and credit unions “the new venture capitalists,” revealing that among credit unions, roughly a third of those that see fintech partnerships as a strong driver of growth invested in fintechs in 2024, and 45% expect to do so in 2025.
“The increase in the number of banks and credit unions investing in fintech shouldn’t come as a surprise, considering the increase in the percentage of survey respondents considering fintechs a growing competitive threat,” the report stated.
Credit unions that invested in fintechs in 2024 averaged $1.4 million per institution, and they plan on investing $1.26 million per institution in 2025, according to the report.
Satisfaction With Core Providers Starts to Dwindle
Overall, credit union executive respondents indicated higher levels of satisfaction with their core banking system providers than bank executives, however, their ratings of their core providers appear to be trickling down. Compared to 2024, fewer credit unions were very or somewhat satisfied with their core provider in five out of six areas; only one area – the ability to integrate third parties – was an outlier.
“For smaller financial institutions, fintech providers like Fiserv, FIS and Jack Henry will never be able to provide all the customization an FI wants,” an unnamed SVP of research for a $3 billion credit union said in the report. “These institutions get stuck leveraging whatever features their core provider gives them. The alternative is to develop and create their own or use APIs. Paying for the talent to develop and manage these systems makes it very difficult for a smaller FI to thrive, however. Whenever a core provider buys some smaller company, that’s one less competitor in the field of too few competitors. It’s frustrating.”
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Natasha Chilingerian
Natasha Chilingerian has been immersed in the credit union industry for over a decade. She first joined CU Times in 2011 as a freelance writer, and following a two-year hiatus from 2013-2015, during which time she served as a communications specialist for Xceed Financial Credit Union (now Kinecta Federal Credit Union), she re-joined the CU Times team full-time as managing editor. She was promoted to executive editor in 2019. In the earlier days of her career, Chilingerian focused on news and lifestyle journalism, serving as a writer and editor for numerous regional publications in Oregon, Louisiana, South Carolina and the San Francisco Bay Area. In addition, she holds experience in marketing copywriting for companies in the finance and technology space. At CU Times, she covers People and Community news, cybersecurity, fintech partnerships, marketing, workplace culture, leadership, DEI, branch strategies, digital banking and more. She currently works remotely and splits her time between Southern California and Portland, Ore.
