Credit Union Members Want Rewards on the Tech Agenda

Credit unions are reevaluating where to allocate their technology budgets based on consumer preferences, according to a new PYMNTS Intelligence study. Reward programs emerged as the top-ranked feature consumers want financial institutions to invest in over the next three years, cited by 27% of respondents. This was ahead of other features such as account fraud protection (23%), mobile banking capabilities (19%), and online banking capabilities and data security innovations (both 18%). The findings suggest that credit unions can no longer ignore the potential rewards opportunity.

Within this opportunity, rewards programs ranked highest among small- to medium-sized businesses (SMBs), with 24% of respondents ranking them as their top innovation priority. The survey, which tested 25 banking features, indicates that while fraud prevention, security, and digital access remain important, credit unions should also consider investing in systems that make rewards programs useful enough to influence where members spend their money.

Current member engagement with rewards programs is relatively low, with only 14% of credit union members using such programs at their primary financial institution in the past year. However, among consumers who have multiple cards, the share rises to 40%, with better incentives and rewards being a significant factor in their decision-making. This trend is even more pronounced among credit union members, with 44% citing better incentives and rewards as a deciding factor.

The potential return on investment extends beyond current members, with 32% of consumers whose primary financial institution is not a credit union stating that better rewards or cash back would make them prefer a credit union for their primary account. This preference is even stronger among credit union members who keep their primary account elsewhere, with 39% of these consumers expressing a preference for the credit union based on better rewards.

Additionally, among Generation Z consumers, the share of preference for the credit union based on better rewards is even higher, at 37%, followed by millennials at 36%.

Credit unions themselves are beginning to recognize this opportunity, with 47% currently offering a rewards program and another 31% planning to launch one by 2029. More than half of credit unions that are open to external support plan to use a partner for loyalty and member-engagement programs. However, technology budgets still need to address the core capabilities of fraud prevention, security, and digital access, as these remain crucial for consumers.

The study suggests that while these capabilities will continue to be important, the next feature that consumers want their financial institution to improve is the one that provides them with ongoing benefits.