Three reasons why neobanks should consider offering crypto

By Sung Choi
Sung Choi, SVP of Strategy and Business Development at Coinme, argues that the rise of cryptocurrencies has become too powerful for neobanks to ignore

As consumers continue to adopt digital-first services, neobanks have seen significant growth due to their lower costs and user-friendly features. A feature that more users are demanding every day is crypto: 85% of crypto owners are interested in buying crypto from their own financial institutions rather than having to go to an exchange or wallet.

Crypto is playing a significant role in the future of money and, in turn, in consumers’ portfolios. However, crypto remains a complex product for many, with third-party exchanges and wallets causing delays and confusion. By integrating crypto solutions, neobanks can solve this problem and provide simplicity in financial management in two major ways – providing access to checking and investment accounts in one place and helping to optimise investments. But as neobanks have grown exponentially, many still struggle to gain users who don’t make the online banking system their primary account due to a lack in its current offerings.

Larger institutions are starting to meet this demand. FIs and fintech like BNY Mellon, SoFi, Mastercard, Robinhood, and PayPal/Venmo have all added digital assets products to their platforms, with many later expanding the types of assets and services. What each FI is starting to find is that their customers continue to demand crypto in a changing investment market: 39% of current crypto owners indicate they plan to switch to a bank offering crypto products within the next 12 months. So, how can offering crypto services differentiate neobanks from competitors and traditional banking systems to increase per-customer revenues?

Here are three reasons neobanks should consider offering crypto as an asset to remain competitive:

Crypto creates new streams of revenue

Providers like PayPal and CashApp charge upwards of 2-3% in exchange fees and spread to convert dollars to crypto (and vice versa). This revenue, combined with the fact that the funds are no longer leaving to third-party crypto exchanges or wallets, can significantly impact the revenue streams of neobanks.

Neobanks should take the time to explore which currencies fit their customers' needs and the potential benefits they offer. Then, these companies can consider packaging these offerings into a premium product and charging a monthly fee to users, earning money between buying and selling diverse cryptocurrencies or creating a combination of both. These types of features can have a substantial impact on the chances of increasing recurring revenue.

Crypto offerings attract new customers and retain existing ones

Given the neobank market's extensive competition, incorporating crypto into the product suite can open up a new segment of customers seeking new investment opportunities across various age groups and income brackets. For example, a neobank’s typical customer may not be a savvy crypto investor but is interested in having some exposure to this new asset class.

Customers wanting to start investing in crypto will likely pick a solution with the right features that convey a sense of trust and reliability. Neobanks already meet these customers' expectations as they have a strong track record with a satisfied customer base.

Crypto can have a retention effect as well. Customers typically sign up for neobanks because it gives them a frictionless experience managing their finances. Features like quick account opening processes, online mobile banking, and access to additional services add a smooth user experience to the app. Suppose an existing customer could also have the option to incorporate their crypto portfolio into their online bank account. This would eliminate the extra process of having to use multiple platforms to manage all of their finances and investments in one place. This is especially true for those who might be a little less tech-savvy since it makes the process less time-consuming and intimidating for first-time crypto users and investors.

Crypto adds a competitive edge

A neobank’s value goes beyond traditional banking needs and has a customer-centric focus. Crypto has been a powerful solution helping push outside the geographical boundaries that most conventional banking systems face.

This includes providing access to financial services to underserved communities. Unfortunately, traditional banks overlook these customers' challenges in the financial industry. But without the restraints of geography, neobanks can expand their reach and use crypto as a feature to help solve problems for specific groups of people.

The continued rise and exploration of crypto is a unique opportunity for every neobank to examine its value proposition and decide how it can utilise digital currencies and assets in real-time financial ecosystems. Crypto-banking offerings will become a must-have for neobanks. The cryptocurrency market is not going anywhere anytime soon, and users will expect crypto integrations as a standard feature. Adding these features will be essential for neobanks to monetise and position themselves to create better market advantages and customer retention.

About the author

Sung is well-versed in crypto and traditional financial infrastructure and how the two can work together. He was pivotal in solidifying Coinme partnerships with key financial industry players Coinstar and MoneyGram. Before Coinme, as managing director at Choi Capital, Sung conducted development in projects in the US, Chile and South Korea. In addition, he is experienced in M&A guidance and negotiations, financial analysis and contract negotiations.

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