By: Velera

If nothing else, 2025 is expected to be another year of changes, challenges and opportunities for credit unions when it comes to their payment portfolios. Strategic consultants within Velera’s Advisors Plus were asked to share insights on how payment portfolios are evolving and what credit unions should expect in 2025.

Checking accounts are driving debit volume growth. After a period of higher-than-average debit growth driven by stimulus funds during COVID, debit card volumes have settled back into a steady 4-5% growth range, which is what we anticipate continuing in 2025. We see usage per debit account trending flat, so additional checking accounts are the largest driver of volume growth. Credit unions that don’t focus on this area in 2025 should expect volume growth to be nominally lower or even decline. Most transaction growth is occurring in lower interchange merchant categories, so anticipate debit interchange rates to decline two to three basis points year over year. – Tom Bennett, Manager, Payments & Deposits Consulting

Debit competition heats up. We have observed a significant increase in competition within the debit card market. Fintechs and financial institutions excelling in this area are offering “checking account” value propositions that appeal to younger generations, who primarily use debit cards for their payments. Credit unions that have embraced these strategies are experiencing exceptional growth in their debit card and checking account portfolios. Leading credit unions, with a targeted approach, are achieving annual growth rates of 5-7% in these areas. If your growth rates are lagging behind the industry average, it's crucial to set ambitious goals and prioritize debit and checking as a core growth strategy for your credit union. Focusing on younger generations will be key to driving growth in 2025. – Kari Anne Arnosk, Senior Strategic Consultant

Competitive rewards will drive portfolio growth. Rewards programs, such as cashback, travel points or personalized incentives, encourage members to consolidate their financial activities, increasing deposits and credit product utilization. Coupled with an effective sales strategy, a credit union can maximize the impact of these offerings by training staff to highlight card benefits and leveraging data to identify cross-selling opportunities. Credit unions should strengthen their portfolios by offering competitive rewards products that drive member engagement and enhance loyalty. Positioning rewards programs as valuable financial tools will allow credit unions to deepen member relationships, increase transaction volumes and boost fee income. This strategic focus not only enhances portfolio growth, but also reinforces the credit union’s role as a trusted financial partner, ensuring long-term member retention and sustained financial performance. – Jason Hortiz, Senior Strategic Consultant

Digital presence is key to growth. Consumer credit card originations were down, and account attrition was up in 2024 — a trend that will likely continue in early 2025 due to economic uncertainty. Slow growth in new accounts will have an impact on volume and balance growth. To combat this, credit unions will need to refine their acquisition strategies by updating products and targeting low credit risk populations, especially those in younger generations. A credit union’s product page should clearly list the product value proposition, as well as provide educational videos about ways to manage credit. Younger generations value long-term relationships with their financial institution and may require specialized account management strategies. Expect originations to pick up in 2025 near the late second or early third quarter. – Shannon King, Senior Strategic Consultant

The opportunity to capture balances awaits. 2024 was a challenging year for credit card volumes, but as the Fed continues to reduce rates in 2025, look for balances and spending to gradually increase on credit cards. As rates decrease, credit unions have an opportunity to capture balances from other credit cards by offering balance transfers at special rates and by offering big-ticket promotions or extra reward points for using their credit union's credit card. 2025 will also be a good time for credit unions to evaluate members’ credit limits to ensure they are within reason and can support these additional balances and transactions. – Chaun Heywood, Senior Strategic Consultant

Discover the hidden potential of business accounts. Business credit cards remain an untapped growth opportunity for most credit unions. These cards generate higher spending, produce more revenue and rely upon many of the same capabilities required to be successful with consumer cards, including product design, pricing and promotion. The best part? Our analysis indicates there is a high probability of some accounts in your consumer portfolio that are being used for business purposes. More and more, we see credit unions exploring this space for profitable growth and anticipate that it will gain steam in 2025. – Brad Wylie, Senior Strategic Consultant

Alternative payments are gaining momentum. Credit unions should have their eye on member usage of alternative payments, including Buy Now, Pay Later (BNPL) and Pay by Bank. BNPL, which offers consumers an alternative way to finance purchases, has seen incredible growth in the last few years and is expected to continue into 2025 and beyond. Pay by Bank is in its infancy, but major retailers like Walmart are evaluating the economics, including lower transaction costs. To offset the impacts of BNPL and Pay by Bank, credit unions should constantly communicate the value of their card offerings, including zero liability, rewards and convenience. Additionally, credit unions should optimize card integration into digital banking, leverage the usage of mobile wallets and consider the addition of installment options on their credit card products. Regulatory scrutiny of BNPL is expected to continue into 2025, as the Consumer Financial Protection Bureau (CFPB) offered an interpretive rule in 2024, largely focused on the inconsistent consumer protections offered by BNPL. - Paige Watkins, Senior Strategic Consultant

Regulatory outlook is likely to be a roller coaster. The current leadership at the CFPB may try to produce a few additional final rules, including limitations around overdraft fees, before the Trump administration takes office. However, if the past is prologue, expect any new final rules to face litigation. With changes in the executive branch, the CFPB is expected to shift focus from aggressive policy making to enforcement instead. Interchange rate reductions remain a risk for issuers in the coming years, with potential legislative, regulatory and technological actions likely to put downward pressure on rates. There has been some bipartisan support for lowering interchange rates and temporarily capping credit card interest rates, though details are still unclear. A more favorable regulatory outlook on cryptocurrency and an increase in financial institution mergers and acquisitions are also anticipated. - Chris Joy, Senior Strategic Consultant 

Operational efficiency will be crucial. As we embark into the new year, the banking and credit card sectors face a transformative era marked by evolving consumer expectations, regulatory demands and competitive pressures. Efficiency is no longer a back-office metric — it’s the cornerstone of leadership and growth and starts with understanding and meeting consumer needs. Digital-first consumers demand faster, frictionless experiences. AI-driven chatbots, real-time credit approvals and predictive financial tools are no longer optional — they’re expected. Leaders must prioritize investments in technology that streamline the member journey while reducing operational overhead. Efficiency isn’t just about cost-cutting; it’s about adding value where it matters most. Leadership will mean driving efficiency at every level by fostering a culture of continuous improvement, investing in forward-thinking technology and remaining adaptable in the face of disruption — without sacrificing innovation or member experience. - Katie Kean, Manager, Payments & Deposits Consulting

These are thoughts from our Advisors Plus consulting team as we enter 2025. If you would like to discuss further with our experts, let us know here.