The financial industry is no stranger to risk. Risk produces YIELD, and it turns out that responsible risk maximizes margins. This ... is banking. However, the emergence of digital assets and new payment networks introduce a unique set of challenges and opportunities.
We recently helped a credit union launch “CU Digital Asset Vault,” a first-in-the-industry solution to the first new asset class in over 40 years (and innovative way to keep a community FI plugged into the future of money). However, we didn’t just slap together some mobile wallet or external bolt-on solution as a quick entry into the space. We worked side by side with the credit union’s leaders and members, building a long-term strategy, phased methods for stepping into this novel space responsibly, in a regulatory sound way, and anticipating legislation and operational realities which will inevitably arise. We call it “The R Path” to digital assets. Together, we carefully navigated this opportunity with a shared vision to serve as an advocate for the members and communities – a vital mindset when looking to provide solutions around ALL the ways people conduct financial transactions.
The result; a strategy for responding to deposit runoffs, a path for liquidity to return to the FI, and a technical bridge between traditional banking and the new world of digital assets and streaming money data – like Bitcoin, US Dollar Coin, and Ethereum.
Identify the Issues
Credit unions often hesitate to adopt new technologies due to perceived risks and concerns about lack of infrastructure (or over-dependence on vendor infrastructure). This cautious approach may have served both institutions and members in the past, at least as far as mitigating risk and reducing liability on the internal credit union operators, but often also results in missed opportunities and a failure to meet the evolving needs of the modern member. We’ll call this what it is: a strategic blunder. It’s also called being a follower, as opposed to an innovator or a leader. Sometimes it’s called buying bolt-ons, instead of building or rolling out innovative products. However you want to refer to it as an executive in your FI, it’s easy to measure and see: it’s costly.
Sure, the risks associated with digital assets and operational blockchain adoption include regulatory uncertainties, market volatility, and security concerns. However, the potential benefits, such as attracting a younger, more informed demographic, offering competitive services, retaining deposits, and maximizing the ROI on your institution’s technology investments are too significant to ignore.
Mitigate the Risks
Educate your Board and Management Team: Understand that what you read on CNBC and Wall Street Journal is usually the opposite of what your big banking competitors are doing. We don’t want to say that powerful financial interest could be intentionally putting out stories to ensure you fall behind larger banks and corporations; but, the fact is “FUD” is real , and it’s also true that big bankers have looked for ways to exterminate cooperative financial institutions for decades – and putting an entire industry behind the curve at the moment money is morphing would be a convenient solution to irradiate community competition in a very profitable way. If you are willing to fight to keep your rightfully held place in your community, DaLand offers 1, 4, and 8 hour sessions for Boards, strategic planning dialogues, and executive education; giving you even better info than your big bank adversaries when it comes to making critical decisions about the future of banking products and digital assets.
Regulatory Compliance: Join the conversation and stay informed. Engage with legal experts who specialize in digital assets to navigate this landscape. Partner with your favorite CUSO and ask them to provide you with a comprehensive, half-day seminar on digital assets. PUSH YOUR REPRESENTATIVE BODIES LIKE CUNA AND NCUA TO ADVOCATE FOR THE RIGHT TO CUSTODY DIGITAL ASSETS AND OFFER BANKING PRODUCTS TO SERVICE ALL TYPES OF MONEY (NOT JUST THE ANEMIC ELECTRONIC DOLLAR)!
Market Analysis and Research: Continuously monitor market trends and survey your own members before launching new products. Understand volatility (and opportunity) and develop plans to protect your members while offering them upside optionality. DaLand can offer your team turnkey reports to understand how many of your members are already using digital assets, and what sort of impact deposit drain has had on your FI as over $2T has flowed out of banks and into the digital asset sector.
Diversified Product Offerings: Engage with DaLand to learn more about CODE Engine and how you can use our Coin2Core component to effortlessly build your own digital vault, catering to your members’ needs. Your members are already using stablecoins, cryptocurrencies, and blockchain-based financial services, leverage this opportunity in your own financial institution, providing a safe haven for the fruits of your members’ labor.
Educate Members: Ignorance is bliss; so is nonexistence! Or so it seems that was the thought the executives at Blockbuster had when Netflix first launched. One of your key roles as a trusted community financial institution is to provide education to your members regarding all forms of money. You’re in the MONEY and WEALTH and FINANCIAL LITERACY business; your financial cooperative charter doesn’t exist for you to be ONLY or merely a registered dealer of the Dollar. Transparency and education will build trust and encourage adoption of your novel products and services. Besides, the reality is, 20% of most members (according to recent market survey data on the topic) could probably teach institutional managers about digital assets. So, at least if you engage in dialogue with your membership, you stand the chance of appearing as if you care about a form of financial literacy that nearly 1/5 of the nation has already invested time in understanding and owning.
Enjoy the Outcome
Leveraging the expertise of experienced fintech partners and strategists who understand the evolution of money, and who have built the core-centric, frictionless technology required for digital asset management which allows you to fearlessly and elegantly innovate new financial offerings. This strategic move will position you as THE leader in your community and will show that you are up to the task of helping your members survive and thrive in a digital-first world.
Are you a leader, innovator, or executive who understands that maintaining the status quo is a surefire recipe for obsolescence? It’s time to stop being afraid of what others call ‘risky’ and to understand the greatest risk as a money institution is NOT being plugged into the future of money-data processing and storage! Join forces with your friends at DaLand. Partner with experts who can provide the intellectual infrastructure and support needed to innovate confidently.
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