“Cryptocurrency,” the comedian John Oliver quipped in 2018, “is everything you don’t understand about money, combined with everything you don’t understand about computers.” While the general understanding of crypto, and its acceptance among certain demographics, has increased, the topic still remains a hot button.
Prognosticators who predicted an early demise for crypto have been proven wrong, and with each passing year it is gaining more mainstream acceptance. Financial institutions, including many credit unions, are considering bringing digital currency into their core product lines and/or wealth management services.
A major factor driving this crypto focus is the need for credit unions to attract (and retain) younger members. America is aging. The Baby Boomers are retiring in huge numbers. Millennials and Gen Z now comprise the majority of the workforce and a significant portion of consumer purchasing. According to the non-profit Bank Administration Institute, 53% of Gen Z have invested in crypto with Millennials just behind at 52%.
This past January, UNIFY Financial Credit Union of Torrance, California became the first credit union to allow members to buy, sell, and hold bitcoin within their credit union e-banking accounts. Shortly thereafter, Idaho Central Credit Union launched bitcoin transaction services via its mobile app and online banking services.
One way for credit unions to ante up in the crypto game, without necessarily going all in right now, is to offer crypto as just one part of their overall wealth management services. If you feel this is an option for your credit union, considering these three items may help smooth the process:
- Provide Education
Just as over the past decade, there has been a concerted effort to educate members about financial literacy, predatory lending practices, and the benefits of solid retirement planning, the same could well be applied to cryptocurrency. Many members may be curious about crypto but have absolutely no knowledge beyond having heard the term. Others may know just enough to be dangerous. They need to know that, for now, crypto is not protected by NCUA deposit insurance and the security considerations involved in holding and trading crypto. No matter their knowledge level, offering crypto-themed educational resources will drive more informed decisions while putting your credit union in front of members and potential members as a valuable resource.
- Set Limits
Retirement account giant Fidelity Investments recently announced it will allow digital assets, exclusively Bitcoin at the moment, as part of 401(K) accounts. Employers have the option of whether to offer the digital accounts as part of their particular plan, as well as setting contribution and exchange limits for the employee accounts. Credit unions could adapt this oversight model with a command-and-control structure that determines which digital currencies they offer, the exchanges that can be used, transaction limits, and establishing the trade windows for buying and selling, as well as settlement into accounts.
- Use the Opportunity to Market the Whole Institution
The goal of adding any new product or service should not be just a short-term spike in public interest. Hanging out the “Now Offering Crypto!” banner might temporarily bump up your foot traffic, but in the case of credit unions the overriding goal should be strengthening member relationships and attracting new members. Consider rolling out your crypto option as just one part of a broader marketing strategy. Combine it with other new services like real time payments, expanded loan offerings, or insurance. Perhaps you are announcing a new lower fee structure or an updated ESG (Environmental, Social, and Governance) policy for your credit union, announcing that you are also adding crypto as well could only serve to heighten interest.
However you might choose to incorporate cryptocurrency into your institution, be prepared for the inevitable push and pull effects of volatility, media influence, and a general populace that still has a steep learning curve surrounding this evolving opportunity set. While Bitcoin did lose half of its value earlier this week after hitting a peak six months ago, some are already predicting there will be an increased demand and price hike for crypto due to diminished supply.
No doubt there will be more large fluctuations in the future for these digital assets. But the number of crypto investors continues to rise and that more than likely includes some of your current members. Credit unions have watched massive outflows of cash go to the crypto exchanges. It may well be time to ponder, if your members are looking at crypto, shouldn’t they be looking at you?