Cryptos, Blockchain and Credit Unions
When I first started working (a couple years ago, lol), there was no direct deposit of paychecks let alone crypto. We would punch a timecard and once a week pick up our check from the office and go to the bank, local grocery store or liquor store and cash it. Depositing a check took far too long to clear.
Fast forward to today and people are investing in something that’s not tangible: crypto. Tech is not really my thing, so I spent some time reading and watching videos about it. Now I can tell you all you need to know about crypto and blockchain technology.
Just kidding. I am the last person you should listen to about how this technology works. I remember the big bag phones that my dad had. Now middle schoolers walk around with their smart phone like it is an extension of their arm.
What I can do is give you food for thought on how credit unions can look at this technology. First, not all credit unions should get into crypto. It is not for everyone, me included. Crypto needs to fit into the strategic goals of the credit union. Credit unions cannot hold crypto on their balance sheet due to the risk to the share insurance fund nor use it to pay dividends, but they can facilitate the purchase for their members through a trusted partner.
That doesn’t absolve credit unions of all risks though. The company you partner with could go belly up, and your member could lose their life savings and blame your credit union for it. Crypto could be a fad that fades away, values tank and more.
But according to a recent survey by PYMNTS in collaboration with PSCU, found that of the 6,483 consumers surveyed, 29% (up 5% from the previous year) say they value product innovation enough to leave their primary financial institution for another bank or credit union.
So, what is the risk of not dipping a toe into the crypto waters? This same survey found that of the 101 credit union executives surveyed, 51% are reluctant to offer cryptocurrency products to members because they do not understand crypto.
Credit unions simply cannot ignore this technology any longer. According to an October survey from Charles Schwab, 46% of Gen Z and 45% of millennials said they “wish” they could invest in cryptocurrencies as part of their retirement planning. Those Gen Z and millennials will find somewhere to buy, sell and trade their crypto.
What all credit unions should be doing is having an honest conversation at the upper management level and with the board about crypto and the blockchain technology it runs on. The recent collapse of FTX does not excuse you from having this conversation or disregarding it out of hand. That’s just one cryptocurrency; there are more than 9,000 active cryptos out there with more than 300 million users worldwide. Does crypto fit into the strategic plan of the credit union now or in the future? If so, how and if not, why?
If a credit union just says it’s not for us or too much risk without looking at it fully and honestly, it’s a disservice to your members. If you are not sure where to even start with talking about crypto, these free white papers from CU Benefits Alliance and FTI For Credit Unions can help get you started. If after honest discussions you decide crypto is not for your credit union, that’s fine. It’s not for every credit union. One thing you can and should do for your members is help educate them about the pros and cons of investing in crypto. This can go a long way in the eyes of your members whom you are looking out even on a product your credit union doesn’t offer.
One last thing to keep in mind, most credit unions are already indirectly involved with crypto. Your members are using their credit union debit and credit cards to buy it elsewhere. Does your credit union monitor card use for that? Is your credit union trying to stop members from using their cards for buying crypto, and if so, why? If a member spends $1,000 on crypto, is that any more of a risk to the credit union than spending the same amount eating dinner out a lot? When the credit union issues a card to a member, you’ve weighed the risk of the member and chose to extend whatever credit amount on that card to them. It is not the job of the credit union to decide how that member uses the card, as long as it’s not illegal and against the terms and conditions.
If it is against the terms and conditions, why? Err on the side of educating about crypto, but don’t push any individual’s gut feeling about crypto onto your members.