When Vendors Price for Giants

 Grant Sheehan CCUE | CEO

Opinion: When Vendors Price for Giants, They Shrink the Future of Small Credit Unions!

There’s a quiet squeeze happening in the credit union industry, and it’s not coming from regulators or competition from big banks. It’s coming from the very vendors that claim to support the ecosystem.

For small credit unions, the problem is increasingly simple and factual: the tools required to compete with digital banking platforms, fraud systems, compliance software, analytics, and payments infrastructure are priced for institutions ten or even 100 times their size. The result is a market where access to essential services is determined not by mission or member need, but by asset size.

This isn’t just inconvenient. It’s structurally threatening.

Vendors often defend their pricing models as a reflection of complexity or scale. Larger credit unions have more users, more transactions, more integrations, so they pay more, and that seems fair on the surface. But the reality is that pricing rarely scales down proportionally. Instead, smaller institutions face high minimums, bundled services they don’t need, and implementation costs that can rival their annual budgets.

In effect, the entry fee to “modern banking” has become too high for many small credit unions to pay.

The consequences ripple outward. Small credit unions, often deeply embedded in underserved, rural, or niche communities, are forced to operate with outdated systems or limited functionality. They can’t offer the same seamless digital experiences, real-time payments, or advanced fraud protections that members increasingly expect. And when members compare their experience to what larger institutions provide, loyalty erodes.

This creates a self-reinforcing cycle:
Limited services lead to member attrition → reduced revenue → even less ability to invest → further competitive decline!

Eventually, the only options left are consolidation or closure.

Let’s be clear about what’s at stake. Credit unions were not designed to be interchangeable financial utilities. They exist because they serve specific communities that are often overlooked by traditional banking models. When smaller institutions disappear, it’s not just a balance sheet that vanishes, it’s local access, trust, and financial inclusion.

Vendor pricing strategies are accelerating that loss.

What makes this especially frustrating is that the marginal cost for many modern financial technologies, particularly cloud-based platforms, is far lower than the price structures suggest. The infrastructure exists to deliver scalable, modular, usage-based services. Yet too many vendors cling to legacy pricing models that prioritize large contracts over broad accessibility.

This is not just a business choice; it’s a strategic one with industry-wide consequences.

If vendors continue to optimize exclusively for larger clients, they will ultimately narrow their own market. Today’s small credit unions are tomorrow’s mid-sized institutions, or they would be, if given the tools to grow. By pricing them out, vendors are effectively capping the pipeline of future customers.

There is a better path.

Vendors can adopt truly tiered pricing that reflects usage rather than size. They can unbundle services, allowing smaller institutions to buy only what they need. They can offer cooperative or shared-service models that align with the credit union's philosophy. And perhaps most importantly, they can recognize that long-term ecosystem health depends on inclusion, not just profitability.

Credit unions, for their part, must push back collectively if necessary. The cooperative model has always been their strength. Leveraging that same collective power in vendor negotiations, partnerships, and even in building alternative solutions may be the only way to rebalance the equation.

Because if nothing changes, the trajectory is clear.

We will continue to see fewer, smaller credit unions, with larger credit unions dominating the landscape, not because they serve members better, but because they can afford to participate.

And that would be a loss not just for small institutions, but for the very idea of what credit unions are meant to be!