3 Key Considerations Before Rolling Out a Crypto Platform

Posted by Patti Wubbels on Feb 1, 2022 9:44:49 AM

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Many of you will remember the initial fear experienced when the Internet debuted in the 1990s. At the time, the popular narrative was that every business, no matter how big or small, would be on the information superhighway by the year 2000, replacing conventional media forms like newspapers, billboards, and the yellow pages. Fast forward nearly 30 years, and now everyone’s life is touched (and in many ways, sustained) by the Web.


Cryptocurrency adoption is trending very similar to those early days of the Internet. Crypto has made its way into mainstream conversations with commercials and even naming rights to stadiums, such as Crypto.com Arena in Los Angeles, though the media seems hot and cold (often tied to the crypto market’s dips and spikes). But, like the Internet, some people are adamant they will not participate, while others are jumping in due to severe FOMO (fear of missing out).

You might be among those who have been dabbling in crypto by buying small amounts of Bitcoin or checking your crypto exchange to see how much the market has fluctuated. No matter where you stand, there are several key questions your organization should be asking:

  1. Do my clients want this product? Consider a survey to see what consumers are already doing and interested in. Ask your employees about crypto to understand what internal resources are available. Check deposit outflows to major crypto players such as Coinbase, WeBull, Uphold, Gemini, and eToro. Looking at your ACH, card, and wires will give you some hard facts on how much money has already left the building.

We recently met with a large institution on this very topic. They estimated losses of approximately $1.5 million a month in outflows to crypto, equal to $17,000 in monthly revenue or over $200,000 a year. This trend will only grow. But there’s good news, too, as research suggests that 46 million Americans own Bitcoin today, and 81% of those surveyed would prefer to buy crypto through their trusted financial institution.

  1. What is the risk/reward to my institution? Risks include continued outflows to exchanges, missed trading revenue, and the potential of being disintermediated by doing nothing. The same survey referenced earlier found that 70% of Bitcoin holders would switch institutions if they found one that offered Bitcoin-related products.

The rewards of offering crypto solutions include the opportunity to engage existing clients, the potential for more fee income, and a possible bump in new customers – if you are an early adopter. When Vast Bank in Oklahoma started offering crypto trading on its mobile platform, they saw a 25% increase in new customers in just one month.

Trading platforms are taking 150 to 300 basis points in trading fees. Imagine if your institution could capture just half of that outflow at the low end of that range.

Just like any other product you offer, it’s worth evaluating.

  1. What does it take to get crypto up and running? You’ve done your research and you’re ready to move forward. Before starting, make sure your institution has a clear roadmap and that the integration partners are chosen wisely.

The good news is that many solutions tie directly to your current tech stack. With cloud technology and API advances, you could be up and running in a few months, though it will likely take longer to come up with questions, find answers, and formulate a strategy than it will to implement the product itself.

The Bottom Line

Adding crypto solutions to your product portfolio may seem like a daunting endeavor, but more people are becoming increasingly comfortable with the concept. Adopting a strategy to adjust to the wants and needs of the market can serve as both an offensive tool (more revenue and client relationships) and as a defensive one (managing deposit outflows).

The key is to develop a thoughtful approach that is scalable over time. SRM’s crypto advisory experts can help you craft a strategy, evaluate providers, and begin your journey into this fast-evolving business opportunity.

 

Topics: Vendor management, Cryptocurrency, Fee Income, Deposits

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