At Unifimoney, we’re energized by the way access to financial technology can level the playing field between the biggest banks and the many credit unions and community banks that serve most Americans.
What would it mean for consumers if institutions competed on service and value rather than the fanciest apps and newest tech offerings? Unfortunately, getting to that future takes time and an openness to adapt — CUs and community banks need to find the right partners and vendors to bolster their offerings.
Strategic Resource Management (SRM) has spent three decades consulting and aiding banks and credit unions in selecting their vendors and partners. Over the last two years, they’ve expanded their services, entering the evolving space of cryptocurrency and all things blockchain via their Digital Assets Advisory practice. Patti Wubbels, a Certified Cryptocurrency Expert and one of the spearheading forces of the group, tells us the first step has been diving headfirst into education.
“For people who have been in finance for many, many years, it's like learning a new language,” she says. This new area is a crossroads of traditional finance and disruption with new digital technology addressing some legacy processes that have become expensive, inefficient, and just outdated. It’s time for another paradigm shift and we all know change can be difficult.
Even as the price of cryptocurrencies has fallen, Wubbels remains bullish on its future applications for financial institutions and their customers and members. “It's not about the cryptocurrency; it's about the technology that's finding friction points in legacy finance structures. It’s also about inclusion for more people looking to build digital wealth – an area where they once lacked access. We take this for granted a bit in the United States, but this is a worldwide movement.”
We gave Wubbels a call to learn how digital assets could improve the way we bank and how her team explains this new paradigm to SRM’s many bank and credit union clients. She says she always tells them: “We’re not telling anyone they should or shouldn’t be entering this space. But they should be informed, and they should be paying attention. It’s only a matter of time until their institution will need to pivot, and there is risk in doing nothing. However, sometimes you don’t know what you don’t know and even dismiss what you don’t understand.”
SRM is celebrating 30 years in the financial industry — I just got my commemorative Yeti mug in the mail yesterday to prove it! We work with banks and credit unions, helping them look for cost savings, revenue opportunities, and process efficiencies with their third-party relationships. A couple of years ago, we started paying more attention to the evolving cryptocurrency movement because we knew early on that there would be a potential impact to the payments space, which is a core area for SRM. We started having clients look at deposit outflows (and inflows) tied to the crypto exchanges and having conversations with the financial institutions. But everyone was pretty deposit-heavy, so they weren't really worried about it. We just kept telling them to keep an eye on it.
We continued educating ourselves, so we could answer the questions we heard from the banks and credit unions, and last November we formalized our Crypto Advisory Team and started down an education path with our clients. This is a new space with new technology, new vernacular, and everyone was starting from zero. Then we helped with strategy conversations, finding unique use cases that made sense for the institution. We have been helping them step through an RFP process and look at a variety of crypto vendors, helping them know what to ask and how to evaluate projects. Just a couple of months ago, we evolved our practice name to the Digital Assets Advisory because, while we do focus on crypto, there is so much more to understand about the future of the digital finance ecosystem as the world keeps moving to more digitization.
In this current bear market, everyone can take a beat, learn a bit more, and make an educated decision on strategy. Some early adopters jumped into crypto before realizing that it's not just another P2P product. This is a bigger ecosystem where more use cases are evolving in different business lines, offering new retail products and back-office efficiencies. Today, we're seeing various use cases develop, and the thing we're most excited about is the technology.
I was in Kentucky recently and I noticed that there was a house a few months back that was sold in Louisville for one Bitcoin. The whole transaction took 80 seconds, with 70 cents of transaction fees. What I usually describe to people is that it's not about the cryptocurrency; it's about the technology. It's like what the horse-drawn buggy drivers thought when the automobile came along.
I don't think it's a matter of size. We have a small credit union in New York that wants to do everything. It's not logistically feasible for them to jump in the deep end, but they're super excited about it. On the other end, I'm a member of a large credit union — because I'm prior military, without calling anybody out — and they don't have anything yet, at least not publicly.
I heard this great explanation the other day, that part of any technology disrupter environment — just like the Dot Coms — is a cycle of creative destruction that eventually becomes a paradigm shift. It's happening across technology, politics, government, education, and health care. It's not just a finance thing. It’s also not just a U.S. thing – this is a global movement. So, when we talk to any credit union or bank, regardless of size, it's more about putting it all into perspective and saying, “Here's what people are doing with it. Here's what's happening globally. Here's what's happening locally. And most importantly, here's why you should be paying attention to it." We're neutral; we don't have a dog in the game. But we're saying, "This isn't something to be ignored, more like be prepared."
If you've watched any of the congressional hearings from a year ago, everybody on the finance committee seemed like, "Heck, no, this is ridiculous." Jamie Dimon of JPMorgan Chase publicly declared that it was a terrible thing, yet behind the scenes we understand they were working on products and solutions. In these congressional hearings, once the committee members were educated, you saw the lights flickering a little bit more on what this technology is doing and how it's empowering people. Even President Biden's executive order is intended to find out where the friction points are and identify if this new technology can solve that. Granted we need consumer protection, and forthcoming regulations will help move this all forward.
For many in the industry who have been around a while, this is challenging us to look at finance processes in a whole new way. We're explaining it to them, but it doesn't have to be an immediate reaction, — we’re really at a crossroads between evolution and revolution. Some parts are moving faster and others slower, and there's a back and forth between how this transformational or incremental change is going to happen. But it's going to change.”
There's a dependency that financial institutions have on their core providers and their online banking providers. Right now, as we're helping some of our clients go through the RFP process, there are issues we're running into where not every crypto vendor is integrated into some of the legacy providers. We're seeing that some online banking providers are exclusive to one crypto vendor. So it could be a hurdle, but no matter what we advocate exploring options and choosing the use case that best fits the FI, then find the right vendor partner for it.
I've noticed that a lot of institutions thought this was a little further off because of a lack of regulatory rulings. The NCUA has been a great regulator in terms of putting information out and being supportive for credit unions. The banks have a little different messaging, where they currently must ask permission and get a letter of non-objection. Some institutions may be taking a wait-and-see approach until regulations are clearer and more understandable. However, it’s not too early to educate and strategize. Waiting can be a risk as well. We make sure our clients have made an educated risk if they decide to wait. Recently, we've had a lot of clients say, "Well, this was once a 2023 initiative, or we have this on our 3- to 5-year plan. And now we're moving our timeline up."
Recently, in San Antonio, one of our clients shared in front of a live audience that they had moved their timeline up. “From an education standpoint, we needed to find somebody like SRM to help us with this vernacular and the terminology,” he said. They didn't know what they didn't know. They were reading the headlines, but the whole world of crypto was a completely foreign concept. They needed to feel like they were starting to get educated on it. They saw the opportunity, because they were seeing the writing on the wall in the form of their outflows. They were recognizing something was moving in the market, so they made it a priority to engage now and get ahead of the pack. Because they did, they avoided being among the 500 other credit unions that are playing catch up.
Credit unions and banks that act now and develop a strategy will have the opportunity to engage and succeed with the most profitable members or customers.
There are three things that come to mind. I think Identity Management Systems are going to be super interesting, and not just in the financial space. Every time I get on the plane, and I want to use WiFi, I have to pull out my credit card and type in my number and hope the guy next to me isn't memorizing my number. Every time we put our credit card number in somewhere, that's a potential fraud window. So, getting to a point where we're identified without having to give a social security number or date of birth, especially if we're already a customer or a member, removes a potential fraud window and smooths a friction point.
Another exciting thing is tokenization. People forget that we've been non-physically moving money around for a while. The problem is that it's been on legacy platforms. If I send you money right now, even through PayPal, it can take five days for you to get it. Tokenization is a whole new way that lets you get it done instantaneously.
The final aspect is NFT smart contracts. I'm not in the mortgage industry, but I bought a home, and it was shocking to see the lack of technology in the process. Think about escrow: The conditions are met but you have to wait for somebody to release the funds. If they input an error or forget to file, it can doom the whole deal. With a smart contract, you could have an escrow move much quicker. With NFTs, you've got an incredible way of proving that one person owns it. You can transfer to another person without an intermediary. I was talking to someone the other day at a credit union — they're renovating their building and were waiting for an inspection. Someone at the city lost the paperwork so they had to start all over again. It pushed everything back a month. If that paperwork was on a blockchain, it would have never happened. I'm excited just so about the future that DLT technology promises!
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