By Roy Urrico
Financial service leaders representing credit unions and banks are entering 2025 cautiously optimistic, driven by stabilizing interest rates, easing liquidity concerns and a resurgence in growth projections, according to the results of two industry surveys from Milwaukee-based advisory and accounting firm Wipfli.
The State of the Banking Industry 2025 and State of the Credit Union Industry 2025 provide insights into current market challenges including fintech and outline long-term growth strategies. The banking industry survey was based on responses from 345 financial institutions across the United States, and the credit unions survey featured 106 credit union respondents.
The surveyed financial institution leaders described challenges such as fintech, cybersecurity, talent shortages and digital transformation maturity as factors shaping strategies and priorities in 2025.
"This year's findings underscore an industry at a critical juncture — embracing AI [artificial intelligence] and digital transformation while navigating persistent challenges like cybersecurity and talent shortages," said Anna Kooi, Wipfli's financial services practice leader. "Financial institutions that stay focused on strategic goals and leverage data-driven insights are best positioned to lead the way."
According to the surveys, financial institutions are feeling positive this year with 58% forecasting asset growth of 5% or more; last year, only 36% anticipated that level of growth. Simultaneously, banks continue to diversify their services to ward off competitors, lure new customers and to capture Gen Zers as they inherit new levels of wealth.
Bank and Credit Union Outlooks
Bank responses indicated strategic priorities are focused on increasing investments in cybersecurity and growing traction for banking-as-a-service (BaaS) and embedded finance. However, many financial institutions also say net interest margin compression, core deposit growth and the economy/regulatory environment could get in the way of continued growth and market share.
"It's critical for banks to integrate their data tools strategically and intentionally," Kooi said. "With shrinking margins, most mid-market banks can't afford costly mistakes from siloed technology decisions. Investing in scalable, pragmatic technology architecture is essential."
In addition, credit union leaders are gaining confidence and are projecting growth in the next 12 months as they try to win and retain members. Over half of surveyed credit unions are increasing their investments in cybersecurity, as 49% of credit unions experienced an increase in fraud in 2024, with 76% identifying unauthorized access to their networks or data in the past year.
Despite its strategic importance, only half of credit unions surveyed said they have reached a mature state of digital transformation in terms of digital member experience and engagement. Credit union leaders listed difficulties in integrating with existing systems and data/cybersecurity concerns as barriers to realizing digital maturity.
State of the Credit Union Industry
The State of Credit Union report, now in its fourth year, revealed that challenges like cybersecurity, talent shortages and digital engagement maturity continue to shape strategies and priorities.
“Credit unions are at a pivotal moment where strategic adoption of AI and digital transformation can define their future success. To compete on a national scale, they must integrate their tools and data intentionally, ensuring seamless member experiences and robust security,” said Kooi. “By aligning innovation with core objectives, credit unions can deepen relationships, enhance efficiency and build resilience in an increasingly competitive landscape.”
“Credit unions are gaining confidence as we head into 2025. Ninety-six percent of the credit unions we surveyed expect growth in the next 12 months. Over half (52%) forecast asset growth of 5% or more — a notable jump from last year, when only 31% predicted similar gains. Likewise, 19% of the credit unions we surveyed project gains of 8% or more, compared to only 2% of credit unions last year.”
The top three services added by credit unions in the last three years are banking as a service/embedded finance, financial well-being products, and wealth advisory services. Over the past three years, 47% of survey respondents added banking as a service (BaaS) embedded finance. Sixty-two percent of credit unions said they currently participate in BaaS/embedded finance — and 14% plan to within the next 12 months.
The report stated, “Across the industry, BaaS has been viewed as an opportunity to create new revenue streams and fight interest margin compression. Within the regulatory framework, credit unions have been able to experiment and innovate with BaaS, but as regulators push for more controls, compliance burdens could become trickier to navigate and even negate the cost benefits.”
The study revealed credit unions’ addition of financial well-being and wealth management products is well-timed — and likely to continue. “Gen Z stands to inherit enormous generational wealth — and some would argue, unprepared. Gen Z consumers engage with financial institutions differently than prior generations, and they often lack basic knowledge about financial matters and products. In the coming years, credit unions will need more products and services that match younger consumers' unique banking needs, habits and risk tolerances.”
Heading into 2025, the credit unions surveyed said their top strategic priorities are improving digital engagement, data analytics/ AI and labor-replacing/staff-augmenting technologies.