Crypto can showcase CU members’ innovation

While the volatility and complexity surrounding cryptocurrency has given many investors second thoughts or cold feet, it is precisely for this reason that some financial industry observers say the time is right for institutions to stay inside and up to date as a service to confused clients – especially small community-based ones lenders and credit unions.

“I don’t want credit unions to feel like this market downturn is permission to do nothing,” said Scott Young, vice president of innovation and design at PSCU, a credit union service organization (CUSO). “Quite the opposite. I think this is really 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 that companies are now really starting to experiment with these use cases and test the interest level of consumers.”

A key factor to keep in mind when gauging that level of interest, he said, is that 23% of respondents to PYMNTS’ April study of the US crypto consumer said they’ve owned crypto in the previous 12 months, and “a large portion after that is 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 cap of crypto over the last five to six months,” Scott told PYMNTS. “But that said, despite the recent market downturn, I think cryptocurrency is still 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 decline we have seen in 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 — about the same as local, regional and national banks — but nearly 40% of digital and online banking customers said the same.

Read more: Credit Union Innovation: Cryptocurrency as the key to member loyalty

While Young was surprised by that 16% figure, saying, “I know more and more credit unions are starting to offer buy, sell, hold opportunities” for cryptocurrencies, usually through a relationship with an exchange, he said there is still “early” days.”

More broadly, Young said he believes cryptocurrency goes far beyond the bitcoin-dogecoin-ethereum token investments. The discussion needs to 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 the 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 because of innovation gaps. Offering innovative digital financial products and services doesn’t have to mean being able to buy, sell and hold cryptocurrencies through the credit union’s banking app, Young said.

Owning and protecting mindshare is a key reason to offer these services, Young said, noting that the larger exchanges are starting to offer other financial services that can be cross-sold — publicly traded Coinbase, for example, encourages customers to direct deposit their checks by offering free pre-programmed purchases.

But at the same time, they can be overkill, he said, especially since CUs aren’t allowed to keep digital assets on their books. One option is to offer what PSCU calls “crypto lite” — a rewards card that offers crypto instead of cashback or points, for example, or perhaps a gift card that can be redeemed at an exchange.

“That way you’re at least offering some kind of crypto service without a lot of the inherent risk of doing that,” Young said.

Another reason on the innovation front is simply that just because some members may not want to buy crypto or earn it as a reward, it doesn’t mean they won’t appreciate the service as innovative for the right members.

Who wants crypto?

When it comes to who CUs are targeting with crypto offerings, the demographics of the Credit Union Innovation study had some surprises. However, age-related interest was not one of them.

It found that 45% to 50% of the three youngest groups – Generation Z, millennials and bridge millennials – had held crypto at least at some point in the past 12 months, compared to 22% of Gen Xers.

“As our current credit union membership ages, I think it’s really important for credit unions to focus on continuing to attract the younger generations,” Young said, adding, “Many of the younger generations are what we call digital natives. Access to everything digital is exactly what they will expect from their financial institution going forward.”

The takeaway, he added, is that credit unions cannot be complacent. That means continuing to educate yourself about what blockchain and crypto can do, as well as use cases — including outside of crypto, Young said.

One way to do that, he added, is to visit 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 very useful and constantly updated.”

“When I was at a credit union, my mantra was that I wanted to be everywhere my members were,” Young said, adding that CUs “have to look at all the demographics and design offerings around them.”

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