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Compared to banks, credit unions are lagging in real-time payments adoption, however credit unions are ahead of banks when it comes to branch network expansion and legacy core system modernization.
That’s according to a new report from the Austin, Texas-based digital banking and lending solutions provider Q2 Holdings, “2025 Digital Banking Trends and Priorities.” In this year’s report, the company, which serves banks, credit unions, alternative financing companies and fintechs, included a section dedicated to credit unions for the first time.
According to the report, published by Digital Banking Report, while 62% of banks offer some version of real-time payments, only 40% of credit unions do. But 61% of credit unions are planning to expand their branch networks this year, compared to 35% of financial institutions surveyed for the report. And while only a quarter of all organizations surveyed are prioritizing modernizing legacy systems or back-office operations, 46% of credit unions are prioritizing legacy system updates.
“Perhaps the most striking finding in this year’s report is the continued commitment to physical presence amid digital acceleration,” the report’s author, Jim Marous, wrote. “Thirty-five percent of financial institutions plan branch network expansion, with credit unions leading at 61%. Rather than contradicting digital transformation goals, this hybrid approach may be an attempt to differentiate from digital-first organizations despite the underlying expense of following this strategy.”
Marous is the owner of Digital Banking Report as well as co-publisher of The Financial Brand and host of the Banking Transformed Podcast.
The report was based on a survey conducted in December 2024. Thirty-one percent of the survey respondents – more than 150 respondents in total, according to Q2 – were from credit unions, 30% were from community banks, 18% from global or large national banks, 14% from regional banks, and 7% from neobanks or fintechs.
Mark Sievewright, who is chief strategy officer at SRM and provided commentary in an exclusive interview for the report, said fraud concerns may be to blame for credit unions’ lag in real-time payments adoption. “The fraud issue around real-time payments is palpable. It’s in every conversation I have with our credit union clients, and they’re being quite skittish overall in the pace at which they allow both send and receive capabilities within real-time payments,” he said.
Concerning the report’s “most striking finding,” according to Marous, Sievewright clarified that credit unions’ plans to open more branches this year does not mean the number of financial institution branches is growing overall.
“What we’re seeing is branch optimization,” Sievewright said. “We’re seeing new branches being opened but also a healthy dose of branches being closed. On a net basis, the number of branches in the United States is not actually going up. At best, it’s staying flat, and more likely, it’s coming down moderately.”
The 35% of all financial institutions surveyed for the report that plan to expand their branch networks this year reflected an increase from 29% in 2024.
When asked about their top three strategic priorities for 2025, 21% and 26% of all organizations surveyed listed “update legacy operating systems” and “digitize back-office operations” as top priorities, respectively. This was in comparison to the 46% of credit unions that said they were prioritizing legacy system updates.
“Credit unions, on average, are much smaller than your average bank, and they have a disproportionately smaller share of the financial services market, eight to 9%, even though there are 4,600 credit unions,” Sievewright noted. “Historically, they have not prioritized the replacement of legacy systems at quite the same pace as some of their competitors, but I can tell you from day-to-day experience that they’re playing catch up fast. And there’s an incredible focus now on improving where they’ve been heading.”
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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.
