A recent report by Moody’s Analytics shows the top 10% of earners—those making over $250,000 per year—now account for 50% of consumer spending. That spending drives interchange revenue, a key source of non-interest income for financial institutions. Banks and fintechs aggressively target these high earners, seeking to maximize transaction-based fees and deepen profitable relationships.
Credit unions, however, have been positioned to serve underserved populations, offering low-fee accounts, first-time buyer programs, high loan-to-value approvals, and flexible payment programs like skip-a-pay. While these initiatives align with the credit union mission, are they leaving credit unions with an income gap that needs to be addressed in other ways?
Two Vectors of Growth
Interchange fees—generated from debit and credit card transactions—are a critical revenue stream for financial institutions. If credit unions focus is weighted towards serving lower-income members with single-product relationships, they risk being left behind. Weighting focus toward the most affluent consumers creates fierce competition in an already crowded space, and detracts from the core membership mission.
A balanced, two-pronged approach begins to make sense:
Attract more affluent members who drive higher spending and interchange revenue
Deepen relationships with existing members to earn Primary Financial Institution (PFI) status
How Digital Transformation Helps Credit Unions Compete
Banks and fintechs are leveraging digital experiences to attract and retain high-earning consumers. Credit unions must do the same by:
Upgrading Digital Onboarding: A seamless, fast, and frictionless experience appeals to affluent consumers who expect digital-first banking.
Offering Multi-Product Bundles: Wealthier members expect more than just a checking account. Credit unions need to make it easy to cross-sell auto loans, credit cards, and other financial products.
Enhancing Payment and Rewards Programs: Credit unions can increase interchange revenue by offering compelling debit and credit card programs with attractive rewards and benefits.
Improving PFI Retention Strategies: High earners need digital tools that simplify money management—automation, financial planning insights, and personalized offers can keep them engaged.
Growing Deposits: A Competitive Imperative
Credit unions have long relied on serving middle and lower-income consumers, but capturing their deposits is becoming more challenging. With rising competition from high-yield savings accounts and fintech alternatives, credit unions can consider:
Providing Competitive Deposit Products: Higher interest rates, dynamic savings options, and digital-first access can help credit unions retain more deposits.
Leveraging Behavioral Insights: Understanding when and how members save allows for personalized nudges and incentives to drive engagement.
Expanding Target Markets: Digital experiences allow credit unions to attract members outside their primary geographic charter (where the density of a branch footprint is most sparse), opening up opportunities to serve higher-income demographics.
The Future of Credit Unions: Balancing Mission with Growth
Credit unions have and continue to evolve without abandoning their core mission. The key is balancing financial inclusion with financial sustainability. By investing in digital-first experiences, expanding their member base to include higher earners, and deepening relationships with current members, credit unions can grow interchange revenue, increase deposits, and secure long-term profitability.
The financial services landscape is shifting, but credit unions that embrace digital transformation will be well-positioned to thrive. The future isn’t just about competing, winning, and growing - it’s about serving and helping people make financial progress - please contact sales@withclutch.com to learn how we can help.
Contributor: Nicky Hinrichsen, CEO & Co-Founder