Knowledge is power.
Conventional wisdom holds that banks and traditional financial institutions (FIs) have much to fear from cryptocurrencies, that bitcoin and other digital offerings will disintermediate incumbents and upend the financial services landscape.
In an interview with PYMNTS’ Karen Webster, Visa VP of Crypto AJ Shanley and UMB Bank Executive Vice President, Chief Information and Product Officer Uma Wilson said a measured, systematic approach to crafting crypto strategies can help FIs turn friction into momentum.
Visa, said Shanley, has been fielding growing interest from clients covering some of the most basic existential questions about cryptocurrencies: how the digital assets can and will impact an FI’s business — and how to get started.
There may be the inclination to do something “massive,” said Shanley, but an optimal crypto strategy can take shape only with insight — gleaned from Visa’s own experience within the crypto realm.
To that end, Visa announced Wednesday (Dec. 8) that it is launching a Global Crypto Advisory Practice, an offering within Visa Consulting and Analytics (VCA) designed to help clients and partners advance their own crypto projects.
Interest is growing. In its announcement, Visa pointed to its own research that indicates that nearly 94% of consumers have awareness about cryptos.
Crypto’s Early Innings
Although the headlines may make it look as if cryptos are in a mature stage of development, Wilson said it’s early innings yet. FIs are starting to understand that cryptos present more of an opportunity for core businesses than a threat.
She likened the movement toward cryptos to the transition from checks to electronic payments — a journey, not a sprint (although it should be noted that while past innovations in payments have taken place over regulated rails, crypto has a whole host of regulatory issues taking shape). Similarly, the progression within the crypto space started with crypto-native companies and moved to FinTechs. Now, banks and credit unions (CUs) are starting to grasp the potential of bitcoin and its brethren.
The advisory practice, according to Shanley, will help FIs looking to expand their customer bases with crypto-related offerings, retailers seeking to offer nonfungible tokens (NFTs) and central banks seeking paths to their own digital currencies (known as CBDCs). In the U.S., the companies said Wednesday, Visa’s team is working with UMB Financial Corp.
Incumbent FIs would do well to start thinking seriously about crypto if they haven’t yet. Shanley said 40% of crypto owners have said they would be “very likely” to switch their primary bank to an FI that offers crypto-related products within the next 12 months.
The findings dovetail with PYMNTS’ own research that shows that 58% of multinational firms are using cryptocurrencies, but only a sliver of FIs offer crypto-related services (although 73% of those FIs that do so plan to add more).
Read more: 58% of Multinational Firms Use Cryptocurrencies
Leveraging Insights and Expertise
As Shanley noted, Visa has been building its crypto expertise for several years and has built cross functional, crypto-focused teams that number in the hundreds of Visa employees. He pointed to Visa’s announcement earlier this year that users of its cryptocurrency-backed card had spent more than $1 billion worth of crypto globally on goods and services in the first six months of 2021.
See more: Visa’s Crypto-Backed Cards Count $1B in Spending
The company also said in its most recent earnings announcement that, as of the quarter that ended in September, it had 60 crypto platform partners with the capability to issue Visa credentials and had captured $3.5 billion of payment volume so far this year.
Along the way, said Shanley, “we’ve developed deep experience across functionalities from engineering to product to strategy to risk and compliance.”
Establishing the advisory practice comes as inbound interest from the payment giant’s corporate clients has been increasing, across the spectrum of its 15,000 FI partners, said Shanley.
“All of our clients should have a crypto strategy,” he said, adding that “every merchant should have an NFT strategy” as well.
To get there, it’s necessary to have a consulting framework in place, offering clients an overview of crypto that starts with the basics and moves on from there, adopting and adapting to bitcoin or stablecoins or NFTs, depending on the use case. Shanley said being better informed may also lead to another strategy: doing nothing. Some clients may decide to sit back for a bit and wait for a more opportune time to delve into cryptos.
A Three-Pronged Strategy — and Where Things Stand
Perhaps it’s no surprise that any crypto strategy starts with education, encompassing everything from understanding the key technical components of cryptos to testing out use cases.
UMB Bank’s Wilson stated that with the combined efforts with Visa, for enterprises (especially FIs) developing their road maps in a three-pronged strategy, there’s a learning curve involved in getting up and running with various crypto projects.