Benefits of Cryptocurrency for Credit Unions

 

The emergence of cryptocurrency has created a lot of buzz in the banking and financial industries. Its very name evokes ideas of cryptic, mysterious doings. As the world becomes more familiar with the intricacies of these new types of digital currency, it’s important for your credit union to know what the buzz is about.

Cryptocurrency was born on the internet. And its virtually universal accessibility makes it attractive to younger and more digital-forward investors and other interested parties. Recently, new guidance was introduced to help credit unions forge a path in this new landscape. Let’s talk about the benefits of cryptocurrency for credit unions.

Cryptocurrencies for Credit Unions

The National Credit Union Administration (NCUA) has already begun sharing guidance on credit unions and cryptocurrencies. The goal is to create relationships between federally insured credit unions (FICUs) and third-party entities that buy, sell, and hold these digital assets.

A cryptocurrency is a form of digital money with no centralized authority. This means transactions are recorded on a digital ledger automatically. The increased interest in cryptocurrencies has led many banking experts to conclude that credit unions could generate some impressive growth by expanding into these new markets.

Cashless financial services have been the trend for several years now, even before COVID-19 came along. Demand for cryptocurrency access continues to grow as well.

The biggest problem with these new digital currencies is that they are not well regulated yet. When transactions take place, they’re logged into the blockchain – the database that monitors all cryptocurrency transactions. There’s no government regulating these transactions, and anyone who uses the blockchain can view it and the transactions therein.

Many people have been using credit cards to buy cryptocurrencies. But the speculative nature of these markets has caused some banks and credit card companies to deny these transactions.

Benefits and Risks of Offering Crypto Services

More and more businesses are embracing cryptocurrency. You can make Starbucks, Microsoft, Shopify, Home Depot, and Whole Foods purchases with crypto “coins.” The main benefit for those who deal in cryptocurrency is the ability to access and move their money without the use of a third party. They are digital files you can store in digital wallets and use anywhere online with participating merchants.

The regulations issues surrounding the crypto industry continue to be concerning for credit unions and other financial institutions that are more in tune with risk management best practices and compliance.

However, credit unions that wish to stay away from this trend may be missing a big market opportunity. In December 2020, a Cornerstone Advisors survey showed that almost 70% of cryptocurrency owners would use their primary banks for digital investments. However, very few financial institutions are interested in managing these transactions.

21 million adults already own some form of cryptocurrency, and this group offers a huge growth opportunity for credit unions willing to take the leap. This could be a big selling point for future member attraction and retention efforts.

Ways to Get Your CU Involved

There are several options for credit unions wishing to mitigate the risks that come with handling cryptocurrency.

First, you can work with a third-party business. Using mobile apps, you can create transaction opportunities for your credit union members, while running all of these assets (and the associated risk) through a third party.

You can also provide crypto custody services. This falls more onto the record-keeping side of things and includes services like safekeeping, analytics, asset servicing, lending, pricing and valuation, trading, payments and settlements, and collateral.

And positioning your credit union as an early partner for cryptocurrency lovers is a great way to banish the myth that credit unions are technologically challenged.

Offering crypto services is also a great way to reach specific members of the unbanked and underbanked audiences. These individuals love having the option to conduct business without having to create or maintain a bank account.

Cryptocurrency will soon be more regulated. Executives within government and financial compliance agencies, like the SEC, are announcing plans to use legislation and other methods to make cryptocurrency more regulated and mainstream.

Protect Your Members’ Assets from Cash to Crypto

Like many consumers, crypto holders are more likely to partner with financial institutions that offer crypto-specific services. Not sure about jumping into the cryptocurrency game? Credit unions can also offer custodial services, create crypto-forward debit and credit card rewards or interest enhancement, and more.

Credit unions are seen as trustworthy and member-forward. Being among the first institutions (and even beating fintechs to the punch) could be a great way to usher in a new generation of online investors.

As your credit union branches out into new digital territories, compliance becomes even more important. With IMS, you can create safeguards for even the most sensitive of data.

Polaris Sonar, our new SaaS application, applies machine learning to discover, classify, and report on sensitive data without impacting production. You will be able to:

  • automate with machine learning and policies
  • identify sensitive data exposure
  • accelerate compliance with privacy laws

Browse these and more offerings here on our website or contact us today!


Make Your Credit Union a Member’s Primary Financial Institution

 

Did you know that only 24% of credit union members currently view their credit union as their primary financial institution? Here are some strategies for making your credit union your members’ primary institution.

Push Your Member Experience Support to the Digital World

“Just Google it” is the motto of an entire generation. Rather than asking questions and being satisfied when they hear, “I don’t know” as the only answer, Millennials and Gen Z are tech-savvy and ready to use their internet connection to help them tackle anything that life throws at them.

This also means that customer service is now digital. Does your credit union have a dynamic member services FAQs page (with text and videos)? Are you hosting webinars for financial literacy and creating chatbot interfaces to help give your members support every time they come to your website?

The big shift to digital services that took place during the coronavirus pandemic is now set to be the primary method for getting anything and everything done.

Products and Services Aren’t Enough – You Need to Be Engaging

Today’s members aren’t looking for just a service, they’re looking for brands that want to understand and engage with them. They want to be able to contact your credit union or jump onto your website and find the best possible advice for their situation and needs. It’s no longer about facilitating a transaction but carrying on a conversation with your member’s needs.

Success in this engagement comes, first and foremost, through your employees. With the right training and data, your team can be the determining factor in making your credit union your members’ primary financial institution.

Personalization is Paramount

Part of that employee training needs to be based on how to incorporate personalization as often as possible. There is a reason that members are called “members” and not “customers.” Mass banking and automation are not the cornerstones of your business. The ability to make every member feel like a “regular” in your establishment is.

But having your staff try and remember the preferences of everyone who comes in your doors or uses your online services is impossible. But data storage and analysis can do that heavy lifting for you. You can look at trends in a member’s banking behavior, personal meetings or loan needs, and so much more when you have a solid data collection and storage process.

Going Digital Doesn’t Mean Forgoing Face-To-Face Interactions

With the focus on cutting-edge digital solutions, it’s easy to start thinking the physical aspects of your credit union – your lobbies, teller desks, and meeting rooms – will soon be obsolete. But in fact, many financial institutions have seen an 80% bounce-back of in-person transactions after they reopened their branches.

Members still crave in-depth conversations with your knowledgeable and professional teams. That face-to-face time is often how you, your teams, and the members learn incredibly important information about products, services, and how to best serve your members.

CUInsight has an incredible example in part 2 of their three-part series on increasing the number of members who consider your credit union their primary financial institution. In Scenario 1, a credit union team member pulls up the account opening checklist when a new member wants to sign up. Depending on what the checklist includes, the member may or may not get the things they need from their new account. But in Scenario 2, the credit union team member has been trained to see this new member’s presence as an opportunity to gain insight into the products and services the member needs right now, and possibly even discuss some things they will need in the future.

Great data solutions and training can help show members that your credit union deserves to be their primary financial institution.

IMS Has the Data Solutions

IMS is a leading provider of enterprise data protection solutions for credit unions. We can help you with everything from core hosting to disaster recovery, IaaS, and more.

Contact IMS for more information.