Credit Unions Can Win With Crypto via Education, Says PSCU

While crypto may have lost its shiny-object appeal, many still believe digital assets hold utility.

In the face of ongoing regulatory scrutiny and volatile market swings, the crypto landscape has shown surprising resiliency coming out of a disastrous 2022.

“We’re definitely seeing more interest and more activity,” when it comes to credit union members conducting crypto transactions, Lou Grilli, senior innovation strategist at PSCU, tells PYMNTS.

“People are able to make the connection that [FTX’s failures and 2022’s collapses] were more of a Bernie Madoff-type event,” he adds, explaining that the macro headwinds and economic uncertainty clouding the traditional financial landscape is renewing interest in crypto as an alternative asset.

And as Grilli says, “People want a safer, more secure and more compliant alternative than Binance or They want a more trusted entity, often with a lower transaction fee, to offer them crypto services — which is generally their credit union.”

So why is it, as PYMNTS research in “Credit Union Innovation: Bridging the Cryptocurrency Divide,” a collaboration with PSCU, shows, that over half (56%) of credit union executives remain wary of providing digital asset products to their members?

“It’s a potential source for member acquisition, and the benefits go both ways,” Grilli says.

Data shows that many credit union leaders are choosing not to offer cryptocurrency because of its volatility (66%), and relatively weak penetration of digital assets as a payment method (50%).

Read moreCredit Unions Weigh Cryptocurrency’s Effects on Member Loyalty

Crypto Owners Want to Manage Assets Through Everyday Institutions

“Instead of a [credit union] member handing over their Social Security number, driver’s license, and other personal information to a website that’s possibly overseas, credit unions will have already done KYC [know your customer] on the crypto provider, and the member trusts the credit union,” Grilli says.

He explains that just under 1 in 3 U.S. consumers own cryptocurrency (31%), and those that do tend to take crypto into consideration when making a host of financial decisions, including where they bank — meaning by offering crypto, credit unions could provide their members with an innovative new service and product offering that helps drive competitive differentiation.

While Grilli acknowledges the sector’s obvious volatility risks, as well as the third-party risks inherent to a credit union choosing the right partner, he underscores that interest for crypto offerings from trusted financial institutions remains strong.

“We continue to see demand from millennials and bridge millennials … who may have more money and can afford to take on a little bit of risk, whereas Gen Z may not have the wherewithal to do that,” Grilli explains.

Observers believe that the more consumers are educated about crypto’s possibilities, the more willing they may be to experiment with crypto products. Half of consumers’ (50%) lack of knowledge about the sector is one reason they do not use cryptocurrency.

“It’s important to provide people with enough information to make educated choices,” Grilli says, emphasizing that “this doesn’t mean convincing them that crypto is good in any way.”

He explains that for each credit union, the decision whether to offer crypto services boils down to highly individual matters.

“Senior staff needs to have a solid understanding of where [crypto] fits in with the credit union’s strategic plans, how it folds into market, how it works with the branding, as well as how it looks from a financial standpoint regarding non-interest income, operations, contact center and member-facing staff needs. These are all considerations that need to be taken into account,” Grilli says.

Crypto Education Precludes the Ability to Scale

Not everyone is going to click on the “learn about crypto” link on a credit union’s homepage, Grilli adds, explaining that many members may go into a physical branch to ask questions, or may call up their local credit union to find out more about what crypto products and services are available.

“There is a need for credit unions to be the trusted entity, and to provide that education — whether it’s the member on a chat session, or the compliance team having their due diligence in terms of when to file a suspicious activity report — accounting, finance, marketing, product management, all these departments need to understand what this thing is, and why the credit union is doing it,” Grilli says.

He emphasizes he is excited about the digital asset landscape and its underlying technology.

“There needs to be clear regulation around crypto, clear education around its utility, and more adoption for it to scale — it’s a network effect,” Grilli says.