How Cryptocurrency Creates a New Revenue Stream for Digital Banks
Among all the trends in digital banking in 2023, one stands out – the adoption of blockchain technology and cryptocurrencies. The integration of crypto into banking products brings multiple benefits: it helps expand functionality, build an innovative image, boost the customer base, gain a competitive advantage – and ultimately, increase revenue.
Supporting digital currencies in a bank app means more than offering a crypto wallet to buy and store coins. It's a full-fledged crypto-banking infrastructure that allows users to earn from their assets and seamlessly spend them. Today's white-label solutions enable the integration of such infrastructure into a digital banking application in just a couple of weeks.
Why crypto for digital banks?
Crypto has already become mainstream – there are currently 420 million owners of digital assets worldwide. These individuals use dedicated wallets and crypto exchanges, but they are also bank customers – and are looking for ways to seamlessly integrate crypto with their fiat infrastructure. Many of these people are likely to be the customers of your bank.
The VISA 2022 study clearly shows: cryptocurrency is a feature customers want to see in their bank. Researchers surveyed over 6,000 people in the UK, Germany, Australia, Argentina, Brazil, the USA, and other countries, specifically identifying cryptocurrency users. Here's what they found:
- 85% of cryptocurrency owners are interested in buying crypto from their bank rather than relying on third-party exchanges and wallets.
- 39% of crypto users indicated that in the next 12 months, they would switch to a bank that supports crypto.
- 55% of consumers expressed a desire to use crypto-powered cards – cards that allow them to spend crypto anywhere VISA is accepted (with crypto-fiat conversion occurring on the go).
Cryptocurrency continues to be a complex product for the average user, with confusion often caused by crypto exchanges and wallets. Neobanks can address this issue by introducing crypto products, offering simplicity in financial management.
Big financial institutions and fintech firms are beginning to respond to this demand. PayPal, Robinhood, Raiffeisen Bank, Bank of New York Mellon, and many other FIs are already incorporating digital asset products into their platforms.
Three reasons for a neobank to launch a crypto product
- New revenue stream. Providers like PayPal charge fees around 2-3% for converting fiat currencies to crypto and vice versa. Neobanks, by offering similar services in-house, can retain this revenue and prevent customers from using third-party exchanges or wallets. This strategy, involving buying and selling diverse cryptocurrencies, has the potential to significantly boost revenue.
- Improved user acquisition and retention. Incorporating crypto into a neobank attracts a new segment of customers seeking diverse investment opportunities. Digital banks already meet customer expectations, making them a trusted choice for those looking to enter the crypto space. Additionally, integrating crypto portfolios into neobank accounts enhances customer retention by providing a seamless, consolidated platform for managing finances and investments, particularly beneficial for less tech-savvy users.
- Crypto enhances neobanks' competitive edge by expanding their reach beyond traditional banking constraints. As the cryptocurrency market continues to grow, integrating crypto offerings becomes essential for neobanks to position themselves competitively and meet customer expectations for standard features in the evolving financial landscape.
The range of crypto products a digital bank can launch
Modern crypto banking offers numerous opportunities to leverage digital currencies. Here are some of the most popular user demands.
The ability to buy, store, and sell cryptocurrency
This is a fundamental feature without which no crypto banking product is possible. As indicated in the VISA report, 85% of cryptocurrency owners want the capability to purchase it within their bank. Transaction fees from this operation can be a primary source of income for the bank's crypto product.
Crypto-powered cards
According to VISA data, over half of crypto owners wish to have the ability to spend their crypto using crypto-linked cards. This seamless crypto-fiat bridge allows them to spend their digital coins directly in shops, restaurants and online stores, converting them into national currencies on the go.
Interest-bearing crypto accounts
Some digital banks offer their users the opportunity to earn passive income from their crypto in savings accounts. It works just like in traditional banking, only there are digital coins instead of fiat currencies.
Crypto loans
Digital banks can offer loans and credit services to their customers. This involves using cryptocurrencies as collateral for loans, eliminating the need for credit checks, and allowing the user to instantly receive funds that they can use for any purpose.
Launch crypto operations in days
To implement all these features in a digital bank, there's no need to spend years and millions of dollars on development and licensing. You can launch your crypto product with a white-label solution – pre-built software offered by another company that already provides the entire crypto functionality.
Vault is a B2B service that enables digital banks to implement a crypto-fiat bridge, crypto cards, crypto loans, and multiple other features in just two weeks. The infrastructure was developed by Choise.com, a cryptocurrency platform that has served over a million clients for six years. In addition to battle-tested software that can be integrated into a neobank through API, the company offers a fully compliant KYC/AML flow and a license, allowing the legal operation in over 100 countries worldwide.
To install ready-made crypto infrastructure, gain a competitive edge, and open a new revenue stream, reach out to partnerships@vault.ist.
