Authors: Stephen Bohanon, Founder and Chief Strategy & Sales Officer, Alkami, and Patrick Sells, Chief Innovation Officer, NYDIG
The popularity of bitcoin is accelerating. In the U.S. alone, more than 46 million Americans own bitcoin today, equating to more than 22% of adults. Over the past year, 1 in 10 Americans have invested in some form of digital currency. This rise in interest has gone beyond the simply wealthy and financially mature individuals. It is becoming mainstream with investors of all ages and incomes. Megabanks have only recently begun offering customers access to bitcoin. Now is the ideal time for mid-tier financial institutions to level the playing field. It is time to add a bitcoin offering to their business model.
Giving Customers What They Want: Digital Investment Opportunities
Customers want access to digital currency investment opportunities. And eighty percent of bitcoin holders want to move it to their bank of choice. In fact, 71 % of those who hold bitcoin said they would switch from their primary bank to one that was able to provide bitcoin-related service offerings if given the choice.
Most customers view their banks and credit unions as trusted, regulated entities. But there’s a rising demand to extend that trust into digital channels. 83% of bitcoin holders would be interested in earning interest in bitcoin on a savings or money market account offered through their bank. And 81% would be interested in purchasing the digital currency through their bank.
For mid-tier financial institutions, this is an excellent opportunity to grow legacy customer relationships and expand into new customer demographics. Mid-size FIs can become an ideal option for both existing and new customers looking to conduct all their asset-related transactions, both traditional and digital, in one central location.
Seizing the Opportunity for Additional Revenue
In relatively short order, bitcoin has become viewed as a legitimate alternate investment vehicle—and it’s one that also generates revenue for banks and credit unions. Potential revenue opportunities related to digital currency fees are currently at an industry-standard 2%, shared among providers.
This revenue, which can be significant, can help financial institutions replace lost interchange revenue as they continue to grow. If they’re not creating bitcoin offerings, their competitors will be, while reaping those revenue rewards.
Mid-tier FIs can leverage existing relationships with bitcoin companies, pared with current market pressures from third parties around money movement, as a catalyst to get their foot in the door of this growing service area. They can leverage bottom-line revenue from bitcoin and similar accounts to upsell loans and other services like little-to-zero mortgage portfolios, auto lending and credit cards. Then, they can use this to extend beyond the traditional consumer financial relationship while becoming an attractive alternative for those whose current financial services organizations have yet to make available a bitcoin option.
However, one word of caution as these FIs consider moving forward with a cryptocurrency offering… Industry regulation has yet to catch up. This means FIs must ensure protective measures are in place to guard against non-regulated digital currencies. As well as create guideposts around the safety and risk of the investment. As a bank or credit union, if you’re facilitating non-bitcoin cryptocurrency offerings, you’re also endorsing them. Customers put their trust in you, and that must extend that to the handling of digital currency.
Looking Ahead to the Future of Bitcoin
As a mid-tier financial institution, embracing bitcoin helps create another high-value customer touchpoint while equalizing its access. It also streamlines financial management in a brand-new way. The key is to act now rather than waiting for the market to become saturated with these offerings. Consumers quickly move from one platform to the next, and the velocity of change is happening at a record pace in today’s markets.
So, while you don’t have to be on the bleeding edge of the bitcoin revolution, your window for getting ahead of the trend is likely less than a year. Past that, you’ll likely be playing catch up when it comes to integrating your customers’ relationship with you and with leading fintech banking apps that include bitcoin options. Now is the optimal time to build a brand reputation for your financial institution by offering this service.
1 NYDIG Survey: Bitcoin + Banking (January 2021).
2 https://www.cnbc.com/2021/07/23/13percent-of-americans-traded-crypto-in-the-past-year-survey-finds.html