Can Community Banks and Credit Unions Compete with National Banks on Credit Card Issuing?
In the consumer credit card space, it’s well-known that national banks outpace community banks and credit unions in market share. However, a new consumer survey from Elan Credit Card and PYMNTS Intelligence— “Credit Unions and Community Banks Gain Credit Card Issuing Momentum”— shows that smaller FIs are gaining ground… and have room to grow.
While Elan calls recent gains made by small FIs “modest in absolute terms,” it also says, “These shifts represent sizable relative gains,” indicating that community banks and CUs are “poised to grow.” This growth comes at the expense of national banks, which CU Insight reports have “experienced a significant slip from 76% in 2020 to 68% in 2023.”
Data from Elan and PYMNTS collected in August 2023 indicates a small shift in consumers’ card choices. Specifically, PYMNTS reports, “The share of consumers with a CU or community bank card as their primary card rose from 8.3% in 2020 to 13% in 2023. Moreover, 24% of consumers said they would likely turn to these financial institutions for their next credit application.”
While 44% still say they’d prefer a national bank for a new card, the trend line represents growth for community banks and credit unions. At the same time, it begs the question: What would it take for these FIs to close the gap?
There’s a simple answer: features.
And while the answer may be simple, addressing it won’t be easy.
However, it’s worthwhile for community banks and credit unions to explore how they may be more competitive on key features. Citing data from the report, PYMNTS says, “More than one-third of national bank cardholders would be highly likely to switch if smaller FIs offered the right features.” This level of interest could lead to significant gains for community banks and CUs if they direct resources toward the capabilities that are most appealing to consumers.
This means starting with rewards and cash-back programs, according to PYMNTS. It reports that these programs “represent the most impactful benefit overall, as 81% of national bank cardholders cited these as important, and 37% of this group would be highly likely to switch to a CU or community bank that provides cards with this feature.”
What other benefits/features could have an impact? The data points to account alerts, autopay, websites and apps as opportunities for community banks and CUs to attract new cardholders.
Elan Credit Card and PYMNTS Intelligence also address another advantage held by national banks: their sizable base of primary account holders to which they can — and do — cross-sell credit cards. Data in the report shows that “82% [of consumers] who have their primary bank account with a national bank also choose these mega FIs for their primary credit card.” This compares with 37% and 23% of CU and community bank customers, suggesting, according to Elan and PYMNTS, “smaller FIs are missing opportunities to sell credit cards to their existing banking customer bases.”
