While the volatility and complexity surrounding cryptocurrency has caused given many investors second thoughts or cold feet, it’s this very reason that some financial industry observers say it precisely the time for institutions to stay in and up to date as a service to confused customers — especially small community based lenders and credit union.
“I don’t want credit unions to feel that this market downturn is permission to do nothing,” said Scott Young, vice president of innovation and design at PSCU, a payments credit union service organization (CUSO). “Quite to the contrary. I think this is truly the long game and not the short game — digital assets and blockchain technology, those use cases are going to continue to evolve. And we’re just starting to see companies now really start experimenting with these use cases and testing out the interest level of consumers.”
One key factor to keep in mind when gauging that interest level, he said, is that 23% of respondents in PYMNTS’ April study on the U.S. Crypto Consumer said they have owned crypto in the prior 12 months, and “a large portion after that are crypto-curious.”
See also: The Data Point: 23% of US Consumers Owned Cryptocurrency in 2021
“Obviously, I think we know what’s happened to the market value of crypto over the last five to six months,” Scott told PYMNTS. “But that said, despite the recent market dip, I think cryptocurrency still remains one of the hottest topics today in the financial landscape … people are curious about it. I think that part is even more accurate today, even despite the dip that we’ve seen in the value.”
It’s hot enough that 57% of all crypto owners say they want to access their holdings through their financial institution’s portal, according to the report “Credit Union Innovation: Cryptocurrency as a Key to Member Loyalty,” a PYMNTS and PSCU collaboration. Sixteen percent of CU members said they can do so now — roughly the same as local, regional and national banks — but nearly 40% of digital and online bank customers said the same.
Read more: Credit Union Innovation: Cryptocurrency as a Key to Member Loyalty
While Young was surprised by that 16% number, saying, “I know more and more credit unions are starting to offer buy, sell, hold capabilities” for cryptocurrencies, generally through a relationship with an exchange, he did say that it’s still “early days.”
More broadly, Young said that he believes cryptocurrency goes well beyond the bitcoin-dogecoin-ethereum token investments. The discussion must include “stablecoins, NFTs, smart contracts — solutions around blockchain that I think are really going to take the lead” as the industry moves forward, he said. “That’s what credit unions should really be focusing on.”
Innovative Actions
One thing the “Credit Union Innovation” study found is just how much importance CU members place on innovation.
Almost a quarter said they would be willing to switch financial institutions because of innovation, and 29% said they would leave their primary FI for innovation deficiencies. Providing innovative digital financial products and services doesn’t have to mean being able to buy, sell and hold cryptocurrencies via your credit union banking app, Young said.
Owning and protecting mindshare is one important reason to offer these services, Young said, pointing out that the larger exchanges are starting to offer other financial services that can be cross-sold — publicly-listed Coinbase, for example, is encouraging customers to direct deposit their checks by offering free pre-programmed purchases.
But at the same time, they can be overkill, he said, particularly as CUs aren’t allowed to keep digital assets on their books. An alternative is to offer what PSCU calls “crypto lite” — a rewards card that offers crypto instead of cash back or points, for example, or maybe a gift card that can be redeemed at an exchange.
“That way you’re offering at least some sort of crypto services without a lot of the inherent risk of doing so,” Young said.
One more reason on the innovation front is simply that just because some members might not want to buy crypto or earn it as rewards doesn’t mean they won’t appreciate the service as innovative for the right members.
Who Wants Crypto?
In terms of who CUs are targeting with crypto offerings, the demographics of the Credit Union Innovation study had some surprises. Age-related interest was not one of them, however.
It found that 45% to 50% of the three youngest groups — Generation Z, millennials and bridge millennials— had held crypto at least some point in the previous 12 months, compared to 22% of Gen Xers.
“As our current credit union membership ages, I think it’s truly important for credit unions to focus on continuing to attract those younger generations,” Young said, adding, “A lot of the younger generations are what we call digital natives. Access to everything digital is just what they’re going to expect from their financial institution going forward.”
The takeaway, he added, is that credit unions can’t be complacent. That means continuing to educate themselves on what blockchain and crypto can do, as well as its use cases — including outside of crypto, Young said.
One way to do that, he added, is to visit the CUSO’s new educational microsite, pscu.com/crypto, which he said is focused on educating credit unions about cryptocurrencies, blockchain and how CUs can engage with and integrate them. It “provides a lot of thought leadership and resources,” Young said, pointing to content such as an educational video for credit union boards. “It’s really useful and constantly updated.”
“When I was at a credit union, my mantra was I wanted to be everywhere my members were,” Young said, adding that CUs “need to look at all demographics and design offerings around them.”
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