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Traditional Banks Could Bring Stability to Crypto. Here's How Tech Can Help Them Do It

Karen McDermott, Global Head of Financial Services Industries Marketing and Communications at SAP

Karen McDermott, Global Head of Financial Services Industries Marketing and Communications at SAP

While pundits were widely questioning the viability of cryptocurrency as turmoil shook the world of decentralized finance, Brad Scrivner, CEO of Vast Bank, N.A., was calmly and assuredly explaining why the family-owned, Oklahoma-based institution’s effort to bring crypto into the retail banking mainstream was the right move at the right time.

“We want to put customers in control of their experience,” Scrivner told me in a recent conversation. “Customers want their financial institution to be more like an Amazon. So we made a strategic decision to be a leader and give them what they want.”

By getting involved in a crypto market dominated by disruption-minded startups and the finance sector’s anti-establishment, traditional OCC-chartered banks like Vast actually may help bring stability and maturity to an asset class that clearly is experiencing growing pains. Spurred by a 2020 interpretive letter from the Office of the Comptroller of the Currency clarifying that national banks can offer cryptocurrency-related custody services as part of their charter, provided they meet certain requirements designed to protect customers, Vast in August 2021 launched a platform that enables retail customers to buy, sell and hold digital assets right alongside their traditional accounts, in the process staking claim as the first U.S. nationally chartered bank to do so. Meanwhile, led by the likes of JP Morgan and BlackRock, some of Wall Street’s biggest-name asset managers are offering crypto as an alternative investment asset class. Even known crypto skeptic Jamie Dimon, CEO of JP Morgan, has been quoted as acknowledging that if clients are interested in digital currencies, banks should be, too.

Vast’s move into cryptocurrency appears to be paying early dividends, as Scrivner attributes significant growth in the bank’s customer base over the past year directly to the launch of digital currency services. Crypto’s potential for increasing wallet share and attracting new types of customers — members of Gen Z, for example, and children of wealth — is a big reason we’re likely to see more banks roll out services built around digital currency. Crypto also represents a new (albeit these days highly volatile) asset class for investors to consider. In fact, before the crypto winter this year, digital assets reportedly had replaced real estate as Chase’s alternative asset of choice. And for traditional banks, crypto can serve as an entry point into the growing open banking movement.

Back-Office Build-Out

In a crypto market that is battling an Icarus-like, fly-too-close-to-the-sun stigma, Vast’s strategy for developing a digital currency business, from risk management to marketing, has been decidedly grounded, measured and, well, very bank-like. That includes how it has gone about building the technology infrastructure to support digital currency-related services and integrate them tightly with the rest of the bank’s retail business. (It is important to note that Vast specifically discloses that its digital currency-related services are not insured by the Federal Deposit Insurance Corporation.)

Once the OCC clarified its crypto stance, Vast then began building the infrastructure for digital currency-based offerings, beginning with a digital platform capable of supporting crypto core services alongside other banking services.

“The big challenge is creating the integration between crypto and traditional banking,” explained Stephen Taylor, the bank’s chief information officer.

Instead of relying on various integrations among third-party core software, Vast has its own fully integrated, cloud-based core system that is built for high-volume, real-time transaction processing, automation-powered reconciliation, and managing KYC and other compliance processes. “In an emerging field like crypto where the regulatory landscape is shifting so quickly, having data visibility and transparency across the platform is crucial,” said Taylor.

Because it resides in the cloud, the platform is powerful enough to accommodate the distributed-ledger blockchain technology that underpins crypto, providing the means for parties to readily trace and validate crypto-based transactions involving the dozen or so digital currencies that Vast offers its customers via crypto exchange Coinbase, among them Bitcoin, Bitcoin Cash, Cardano (Ada), Ethereum (Ether), Litecoin, Orchid and Algorand.

The platform is built for growth, with a hyper-scaler framework in which Vast is creating a crypto-centric business ecosystem that includes its crypto exchange partner, Coinbase, and others. Those partners may eventually include other banks, noted Taylor, as Vast’s intentionally developed an open-source platform to accommodate other institutions seeking to get involved in crypto, without doing the heavy lifting of developing its own platform.

Shaping the Crypto CX

All that back-office integration is geared toward creating a seamless and familiar customer experience on the front end — an experience designed for the “crypto-curious,” according to Scrivner.

“We wanted to take the complexity out of it for people,” said Taylor, “so they don’t have to wait to move money between a crypto account and a traditional bank account, and they can do other things like name beneficiaries for their crypto accounts.”

Vast’s fully digital, mobile-enabled crypto customer experience revolves around an app through which customers can open an account, move money via ACH, buy and sell specific digital currencies, manage a debit card and generally oversee their account just as they would traditional accounts. Customers also can learn about crypto and the various types of coins Vast offers on its platform.

From the first consumer credit cards back in the 1940s and 50s to ATMs in the 1970s and now seemingly with the retail mainstreaming of digital assets, banks have found ways to innovate on customers’ behalf. Moves by banks like Vast to offer crypto-based services within a familiar, well-established, traditionally risk-averse and compliance-focused retail banking institution could well prove to be exactly the stabilizing force that this still maturing asset class needs, giving crypto-curious consumers what they perceive to be a safer way to put a toe in the digital currency waters.

Karen McDermott is global head of marketing and communications for the financial services industry at SAP, focusing on the innovations that are propelling financial services into the future, including digital payments, AI, ML, blockchain and metaverse technologies She began her 25+ year career with American Express in global advertising and has held leadership roles with JP Morgan Chase, Citi, BNY Mellon and Xerox.

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