It has been 126 years since Alphonse Desjardins founded Canada’s first credit union, or caisse populaire, in Lévis, Que. After studying financial co-operatives in Europe, he adapted their model for Canada.
Desjardins promoted the movement by lobbying governments to recognize the cooperative model and helping communities establish their own credit unions. By his death in 1920, there were about 160 caisses populaires across Quebec, Ontario and the northeastern United States.
At the time, credit unions filled lending gaps. Newcomers without credit histories, farmers whose incomes depended on the weather and women without male co-signers often turned to them after banks deemed them too risky, said Jeff Guthrie, president and CEO of the Canadian Credit Union Association.
Their community roots helped credit unions grow alongside banks, offering an alternative that serves 11 million Canadians.
In recent years, however, the model has struggled to compete. Many credit unions believe consolidation is essential to their survival as they struggle to keep pace with banks, fintechs and rising regulatory costs.
The lending gaps that fuelled credit unions’ early growth have largely disappeared, population growth has slowed and younger consumers expect seamless digital banking services that are expensive to build, Guthrie said.
Saskatchewan-based Innovation Federal saw this up close. By 2016, membership growth had flatlined as the province’s rural population aged. The average member was 48.8 — up from 43 in 2008.
Executives considered expanding into Saskatoon and Regina, said Daniel Johnson, CEO of Innovation Federal. They decided to go national instead.
Members voted to become a federal credit union in 2017. Innovation Federal completed the transition in 2023, becoming Saskatchewan’s first federally regulated credit union. Soon after, Alberta’s ABCU Credit Union proposed a merger.
By April 2026, it was official. Innovation Federal Credit Union and ABCU finalized Canada’s first interprovincial credit union merger.
“For some credit unions, there’s an existential dimension to [consolidation],” said Jon Bowes, a mergers and acquisitions partner at Deloitte Canada in Toronto. In this case, the match made sense. ABCU was in an adjacent province with similar demographics, making it easier to serve member needs.
The deal is part of a trend. The number of credit unions in Canada outside of Quebec has fallen by over 90% — from about 2,000 institutions in 1980 to fewer than 170 today, according to the Canadian Centre for the Study of Co-Operatives.
As with other parts of the financial services industry, a desire for scale has triggered consolidations for decades. The system averaged roughly 50 mergers annually during the 1990s, about 40 a year in the 2000s and roughly a dozen a year since, Guthrie said. He expects the existing pace to continue through 2035.
Scaling up lets credit unions make new revenue-generating investments while expanding their services to earn and keep clients. Traditionally, about 80% of a credit union’s bottom line comes from financial intermediation — taking deposits and making loans. Johnson worries that those margins will be driven down by competition.
Digital banking is among the biggest investments, Guthrie said. “A lot of younger Canadians are saying, ‘I love credit unions’ values, but I’m not giving up my phone banking app.’”
Fintechs are “gobbling up” market share by delivering increasingly frictionless digital experiences, and credit unions need to grow to afford to keep up, Johnson said.
Consolidation lets credit unions spread out their tech costs and eliminate duplicative spending in the system, helping them compete and attract new members, Bowes said.
Stiff regulation
The federal government wants more competition in the banking sector, Guthrie said.
For example, Budget 2025 relaxed rules for credit unions to join the federal system. This was complemented by the Office of the Superintendent of Financial Institutions’ (OSFI) June launch of a streamlined approvals framework for provincially regulated credit unions to become federally regulated institutions.
These initial steps have helped credit unions scale up, but the industry argues that more changes are needed.
Innovation Federal and ABCU completed their merger before the streamlined process existed. The transaction required approval from six federal and provincial government bodies. Alberta also had to amend parts of its Credit Union Act, Johnson said. “It was super expensive.”
While the streamlined OSFI framework made this easier for credit unions going forward, it hasn’t changed the fact that federal credit unions can only merge with other federal credit unions, Johnson noted.
Provincial credit unions must first hold a membership vote and then qualify to go federal. That’s one more step than should be required, Johnson said. ABCU had to operate as a federal credit union “for a nanosecond, and then move across to Innovation Federal,” Johnson added.
He’d like provincial credit unions to be able to merge directly with federal credit unions.
Federal status allows credit unions to operate nationally rather than being limited to a single province. But as these organizations go national, they face compliance obligations that their regional peers generally don’t. National credit unions are supervised by both OSFI and the Financial Consumer Agency of Canada, both of which add regulatory requirements.
Abdullah Mamun, a professor of finance and a fellow in credit union finance at the University of Saskatchewan in Saskatoon, said he’s concerned about federal credit unions’ ability to absorb the necessary compliance costs.
Guthrie also wants the Competition Bureau to assess credit union mergers differently from bank mergers.
“They view a merger of a credit union in the same light as the merger between RBC and HSBC,” he said.
Larger credit unions increasingly compete with the major banks rather than with smaller credit unions, Guthrie argued. He suggested that the Competition Bureau apply different criteria to mergers of different asset thresholds.
A long tail
Credit unions are likely to continue following one of two paths: expand within their home province or convert to the federal framework, Guthrie said.
At the current pace, Canada will end up with a few very large credit unions in each province that keep acquiring smaller institutions and a handful of national credit unions, Mamun said.
Guthrie pointed to Australia, which has stabilized at about 45 credit unions with one or two mergers a year.
Of the 158 credit unions in Canada, eight of them hold half of the assets, Guthrie said. Consolidation will reinforce this long tail of credit unions where the larger ones grow to compete with banks, and smaller ones survive in the communities that support them.