Alijah Poindexter 00:00
Good day and welcome to the Buzz, a Bank Automation News podcast. I’m Associate Editor Alijah Poindexter. Recently, I spoke with Anna Kooi, National Financial Services Leader at financial consultancy Wipfli. I spoke to Ms Kooi about the implementation of crypto services at community banks as a tool for differentiation, along with how these banks will adapt to changes in an increasingly digitized financial ecosystem.

Anna Kooi 00:46
Yes, we’re working with a few community banks who have started down the process already. I’m looking to add custom services within their offering anything from adding custodial services partnering with, again, another FinTech company, that would do to custodial services, but added to their platform. So it looks and feels as if as part of a financial institution, but really, there’s, there’s another third party bass, backing it from a company obviously helps them on the regulatory side as well. For those financial institutions that have concerns about getting into the space, the other one that we see quite often is allowing them to have account and transfer between the two accounts. So you know, go from the bank, US dollar into, you know, whatever wallet they might have in the Bitcoin or stable coin. And again, having that all right there easy for them within their platform from a financial institution. And then there’s others who are talking about doing, you know, deposits for each house or allowing interest bearing accounts where the interest is paid out in crypto, you know, versus in the US dollar. And so I think many of them are exploring the community banking side, you’re not seeing them quite enough yet, although there’s a lot of activity around, you know, getting, getting their charters ready and prepared, having conversations with regulators getting their back office, a lot of times, you know, getting the technology as well as having the right talents within the financial institution in order to, to offer those types of things. And so that’s, that’s where I see a majority of the institutions currently, but I think 2022 is going to be not, you know, it’s not going to be a trickle back, I think we’re gonna see a windfall, particularly if the Federal Reserve and the OCC come out with regulation. To clarify, we’re how they’re looking at crypto, or even, you know, the Federal Reserve currently is looking at offering cbdc. And so if that were to come out, I think you’ll see even more jumping, jump into this space.

Alijah Poindexter 03:03
It has down here it says nearly 1/3 Expect to add crypto services within the next 18 months. Is that number similar to the amount of respondents who who are just sort of interested and or worried and or paying attention to crypto? So in other words, I mean, is it? What is it what is just the general sort of view of crypto and digital currencies in the sort of community bank spaces.

Anna Kooi 03:28
There’s one graph that shows the details and the number of one to seven, I think it was something that went off the bat right there. And so those that we have in the likely category, those are the ones who are actually down the path of, you know, they have a plan, and they’re, you know, working towards that, like I said, your back office of technology, people or whatever. But, you know, I would expect them to start offering the services, versus others who may have been on the other continuum that are really following it, getting education, that type of thing. But I think that 30% is going to do it, versus maybe others who are just trying to figure out how to

Alijah Poindexter 04:15
get in the, you know, sort of Challenger and digital bank space. I mean, you’re spoilt for choice, from the perspective of somebody who is still going and using a community bank, be it in person or using their digital services or doing some type of hybrid approach, which is what I do and what probably most people in America still do. You know, there are a lot of fintechs that regular Joe Schmo may not have heard of, but they have heard of Venmo and they have heard of Zell and they have heard of buy now pay later. And so my question is, you know, so are banks working to sort of be a part of the quote unquote, real time revolution,

Anna Kooi 04:51
where you’re gonna see the pain is basic. And we’ve already had a new alluded to it. So December The 2021 Federal Reserve came out with their payments study, which they do on an annual basis. And that was, this was the first time first time that we have ever seen the number of credit card users, whether it’s in person, or online, have decreased. And it’s not that the number of transactions decreased, was increased is the p2p or the peer to peer. And that’s your Venmo. PayPal. Yeah, that’s all part of the blockchain, right? That’s part of the blockchain fees as part of the crypto defy all those things that they’re looking at, I think we’re gonna see the payment side of the industry just explode as we continue through 2020. To be honest, it’s gonna actually help them not only are they going to get real, they’re gonna cut out third parties, and they’re gonna cut out some of the expenses that they incur for those other transactions, particularly on the credit card side.

Alijah Poindexter 06:04
You know, they’re, they’re all these fintechs and all these challenger banks, and all these people doing X, Y, and Z. And from the position of a wealthy or relatively successful, you know, regional community bank, they have a lot of capital, and they have a lot of assets under management, they have a very deep community presence in their in the region they operate in. So from their perspective, it may seem like okay, well, this FinTech does that we’re not really worried about that, because that’s only 1% of the overall sort of pie that we can offer in terms of financial services. But it’s 1%. And then another FinTech does 1%. And then another FinTech or challenger bank does 5% are community banks going to have to start really considering the sort of larger or more ubiquitous fintechs and challenger banks, not just as as you know, worrying about maybe what they can do for people that the bank can’t but a straight up challengers.

Anna Kooi 06:54
Well, yeah, and I think that’s why they’re we’re seeing them significantly moving towards the digital journey, and customer journey analysis. And watching they trying to find that frictionless. With a frictionless to tear and self serve digital banking. That’s kind of our tagline. But friction was has to be key, because, I mean, think about it. Every day that goes by, there’s more or less baby boomers, and there’s more Gen Z’s and millennials that are in the industry. I mean, that’s just, you know, that’s just human rights. As that continues, you’re gonna have more of the millennials and Gen Z’s making those decisions of where those assets are. And they’re going to be getting the assets from the baby boomers. And to the extent that you go back to the 46% that the ABA refers to, and they’re going to leave your bank if you don’t do something on the digital side. And if you’re not making their customer journey, that app, allow them to do all of the things that they want to do. Or if they go to XYZ FinTech and they can get their paycheck two, three days earlier, or even one day earlier, they’re going to do it. And so that’s why it’s now imperative for the community banks to really start moving, because it’s not going to be something that they can do overnight to make these changes, because a lot of their technology on the back side is very dated. And so they can bolster on FinTech A, B or C, like you’re saying that might do this here. And, but that’s gonna be very clumsy. And it’s not going to give the customer journey, that these folks are really looking for that, you know, a nimble neobank, or some of the fintechs can, I think the other thing that you’re seeing in some of these banks that are very affinity focused, and so that’s where the community banks can continue to keep their edge is a lot of the Gen z’s. And Millennials are looking for a sense of belonging, right. And so to the extent that they have that belonging to their hometown, or that’s where they grew up, or, you know, a cultural focused or a neobank out there that just came out, it’s just for musician, right? So the community banks really start to think about what Who are they what do they stand for? And how can they keep that affinity that relationship with their customers? That’s going to be a big piece of this as well along with the digital side?

Alijah Poindexter 09:34
You know, from your perspective, can you just offer a maybe a summary of I mean, what is the Community Bank space going to look like? 18 months down the line.

Anna Kooi 09:44
Really big space in the future is going to be digital serves with relationships, focus, and crypto get to be a piece of it. And those who fall behind Unfortunately I think are going to be a night I’m in a state I think they’re going to either innovate or they’re going to be acquired

Alijah Poindexter: 09:46
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