Consumer credit trends are sending a clear signal: credit unions are losing ground in credit cards just as auto lending begins to recover. However, the lending landscape is evolving. Higher fuel costs and ongoing affordability pressure are influencing vehicle purchase decisions, softening some new auto demand while increasing consumer interest in electric vehicles (EVs). At the same time, Buy Now, Pay Later (BNPL) is increasingly replacing traditional credit cards for everyday purchases.
For credit union leaders, this is not just another market update; it is a strategic warning. The competitive gap is widening, driven not only by banks scaling faster, but also by consumer increasingly spreading their borrowing and payment behavior across cards, installments, and more selective big-ticket purchases.
Let us dive into the changes and how credit unions should respond to them.
Credit Cards Are Becoming a Strategic Weakness
Credit cards remain one of the most important products in consumer finance. Yet credit unions are falling behind banks at an accelerating pace.
- Credit union credit card balances grew by just 1.5% year-over-year
- Their market share slipped to 6.7%, continuing a gradual decline
- Banks, in contrast, grew balances by 3.9% and now control over 92% of the market
More than a growth issue, this is a structural disadvantage.
At the same time, installment payments are eroding credit card share at checkout. As BNPL becomes a familiar financing option for discretionary purchases, it is eroding revolving card volume from categories where credit unions already struggle to win top-of-wallet status.
Why This Matters
Credit cards are not just a lending product. They are:
- A daily engagement tool
- A rich source of behavioral data
- A driver of interchange revenue
- A gateway to deeper member relationships
However, the credit card‘s position as the default payment option is increasingly being challenged by BNPL providers at the point of sale.
When credit unions lose relevance to cards, they lose visibility into the financial lives of members. That weakens cross-sell opportunities, retention, and long-term growth. And with more transactions moving to BNPL providers, the loss goes beyond balances to include transaction data, interchange income, and everyday engagement.
What Needs to Change
To regain share, credit unions need a more modern card strategy:
-
Move beyond rate-based competition
Competing on APR alone is not enough. Members now expect rewards, seamless digital experiences, flexible installment options, and real-time controls. -
Leverage member data more effectively
Credit unions sit on valuable transaction and deposit data, but often underutilize it. Predictive models can identify who to target, when to engage, and which offer is most likely to convert. -
Focus on activation, not just issuance
Issuing cards is not enough. The real battle is winning everyday usage and securing top-of-wallet status. -
Partner where needed
Fintech partnerships can accelerate capabilities in rewards, installment payments, and digital engagement without long development cycles.
Auto Lending is Recovering, but Demand is Shifting
While credit cards remain under pressure, auto lending shows signs of recovery. This rebound is taking place in a more selective vehicle market shaped by higher fuel prices and elevated ownership costs.
These factors can suppress some new auto sales while encouraging consumers to consider lower-cost vehicles, including EVs.
- Credit union auto loans grew about 1% year-over-year, marking the first annual increase in over two years
- This follows a prolonged decline between 2023 and 2025
Growth remains modest, but the trend reversal is strategically important.
That distinction matters. The opportunity is not simply to regain loan volume, but also to anticipate which vehicles consumers are most likely to finance next. If fuel prices remain elevated, affordability pressures may delay some purchases, but they can also strengthen the case for EVs based on total cost of ownership.
Why Auto Lending Still Matters
- A core strength for credit unions
- A high-volume acquisition channel
- Often, the first product in a member relationship
A recovering auto portfolio provides a platform to rebuild broader growth.
How to Capitalize on the Momentum
-
Expand dealer partnerships (indirect lending)
This is where scale and speed can be achieved most effectively. -
Increase lifetime value per borrower
Bundle auto loans with insurance, protection products, and refinancing options. -
Use advanced pricing analytics
Winning requires dynamic, risk-based pricing rather than static rate sheets. -
Build EV-aware lending strategies
Align lending, pricing, and targeting to shifting vehicle preferences as fuel costs influence purchase decisions. -
Cross-sell aggressively
Every auto loan should serve as the starting point for a broader member relationship that includes checking accounts, credit cards, and deeper digital engagement.
The Real Issue is a Growing Capability Gap
Beyond individual products, the data points to a deeper challenge: banks are outperforming credit unions across both revolving and non-revolving credit.
This signals a widening gap in:
- Technology
- Data analytics
- Speed of execution
What This Means
This is no longer just a product issue. It is a question of institutional capability in a market where payment behavior is fragmenting, and vehicle demand is shifting.
It is not a lack of member trust that puts credit unions at risk, but a lag in data-driven decision-making and digital execution that leaves them vulnerable to being outmaneuvered. Competing now requires visibility into card spend, BNPL substitution, auto affordability, and emerging EV demand patterns.
The Strategic Pivot is from Products to Portfolio Thinking
Another subtle but critical emerging trend: credit union non-revolving balances are flat, while banks continue to grow.
This underscores the need for credit unions to shift from product silos to a portfolio optimization strategy. As spending increasingly moves across credit cards and BNPL products, and vehicle demand becomes more sensitive to fuel costs and total ownership economics, a broader portfolio view is essential.
The New Approach
Instead of treating lending products independently, leaders should:
- Optimize for total member value
- Balance growth, risk, and yield across the portfolio
- Identify underpenetrated segments and opportunities
This requires stronger integration between lending, marketing, risk, and analytics.
The Winning Play is to Connect Cards, Auto, and Analytics
The leading institutions will not treat cards and auto lending as separate growth agendas. They will connect them while adapting to two market realities: more spending is being split into installments, and more vehicle shoppers are weighing fuel efficiency and EV economics alongside sticker price.
Analytics is the Real Differentiator
Ultimately, the institutions that succeed will not just offer strong products; they will leverage intelligence in high-impact areas such as:
- Next-best-product recommendations
- Credit line optimization
- Member engagement scoring
- Attrition prediction
- Dealer channel analytics
- BNPL substitution monitoring
- Vehicle preference and EV demand analytics
The competitive gap is increasingly analytical, not structural.
Building the Analytics Foundation
Data Analytics ServiceDESK helps credit unions translate member and transaction data into actionable decisions that improve performance across credit cards, auto lending, cross-sell, and risk management, without building new infrastructure or expanding specialized internal teams. Capabilities include:
- Marketing & Customer Analytics for card activation, cross-sell targeting, and next-best-action intelligence.
- Portfolio & Origination Analytics to support auto lending growth through improved conversion, pricing, and profitability insights.
- AI-Driven Models for churn prediction, propensity scoring, and lifetime value optimization, enabling more targeted engagement across fragmented payment behavior.
The growth flywheel only works when the analytics foundation is in place. Quinte enables credit unions to build and operationalize that foundation.
Bottom Line
As consumer spending and borrowing behaviors evolve, credit unions must look beyond products and focus on insight-driven decision-making. Those that combine trusted member relationships with strong analytics and digital capabilities will be best positioned to compete and grow.
About the Author
Paresh Ashara
Vice-President at Quinte Financial Technologies
Paresh Ashara is a Vice President of Data Analytics, AI & Automation at Quinte Financial Technologies with extensive experience in leveraging data-driven insights to shape business strategy and improve financial performance. He specializes in advanced analytics, consumer lending insights, and digital transformation across financial services. Paresh is passionate about helping financial institutions translate their complex data into actionable strategies that drive growth, enhance customer engagement, and build competitive advantage in a rapidly evolving marketplace.
Paresh Ashara is a Vice President of Data Analytics, AI & Automation at Quinte Financial Technologies with extensive experience in leveraging data-driven insights to shape business strategy and improve financial performance. He specializes in advanced analytics, consumer lending insights, and digital transformation across financial services. Paresh is passionate about helping financial institutions translate their complex data into actionable strategies that drive growth, enhance customer engagement, and build competitive advantage in a rapidly evolving marketplace.
Sources
- Credit Unions Slip on Cards, Gain on Auto https://www.cutimes.com/2026/05/11/credit-unions-slip-on-cards-gain-on-autos
- Federal Reserve Board - Consumer Credit - G.19 https://www.federalreserve.gov/Releases/g19/current/
