Money is morphing and financial literacy now requires an increased understanding of the revolutionary, rapidly evolving terms and technologies prevailing in this space. Cryptocurrency, Digital Assets, Virtual Currency, Stable Coins, Central Bank Digital Currency (CBDC), and Decentralized Finance (DeFi) are changing the way consumers ‘do banking’. Daily, active users of digital assets continue to grow in the United States, with Coinbase continuing to dominate market shares, approaching a million active users daily. (The Coinbase Super Bowl ad brought twenty million people to its site in a single minute rocketing the app from 186th to 2nd place in app store downloads!). And to continue the trend, this past November (2021) was coined Crypto Literacy Month; formal recognition that consumers are diving in, educating themselves on the currency of digital banking and adopting the tools and technologies of the digital age. The future of finance—and financial planning—is now.
“Becoming a trusted expert on these currency innovations will be the difference between continuing to deliver value to your community and consumers vs. displaced by money becoming data!”
So, while consumers and communities quickly adopt and acquaint themselves with new ways of generating wealth and storing and exchanging value, few local institutions are keeping pace! Do you know the differences, similarities, strategic benefits, and risks of these new but potent financial tools or are you waiting for regulators to dictate the future of digital assets in banking? Becoming a trusted expert on these currency innovations will be the difference between continuing to deliver value to your community and consumers vs. being displaced by money becoming data!
The nature of competition is changing. Today, national and international forces—including governments—are redefining the future of finance. If you’ve been keeping up with current events, you know central banks are aggressively investing in these digital frontiers to reshape the nature of commerce, value storage, and wealth generation, developing CBDCs (Central Bank Digital Currencies) as a means of transcending the limitations, expenses, and systemic vulnerabilities of the electronic dollar (ACH/NACHA/SWIFT). The Eurosystem launched a Central Bank project, the Bank of Canada introduced Project Jasper to prepare for the future of money, and at the 2022 Winter Olympics, China showed off the Digital Yuan, allowing attendees to purchase food and souvenirs using the country’s CBDC. In the U.S. the Federal Reserve has been studying the idea as well. To kickoff 2022, the Fed released a CBDC feedback form to incorporate in their research and analysis paper, Money and Payments: The U.S. Dollar in the Age of Digital Transformation, and just recently published an executive order “ensuring responsible innovation of digital assets and distributed ledger technology”.
Under threat by these tectonic developments, cooperative financial institutions’ stewardship is needed now more than ever. Consumers are quickly adopting these new forms of data as means of value creation, storage and payments so it’s perilous to believe that the “core” of our business will remain unchanged, simply because of the (historical) privileged position your institution earned. Digital rivals have the ability to spin up connections for these new networks in can minutes, causing money to stream out of banks. The risk: without a bridge between legacy core processing and modern digital assets, your institution won’t see that money come back! The fact is consumer and corporate use of these new money and digital currency networks are escalating rapidly and the impact on your local communities and consumers are not exactly top-of-mind in these global events. However, the disruption of decentralized finance does not necessarily equal irrelevance of local FIs. DaLand’s philosophy, strategy, and products are designed to keep FIs relevant epicenters of commerce in their communities. We know that in this reality of money becoming digital, distributed, decentralized, and democratically controlled, local FIs can be immensely valuable and relevant to consumers and communities.
Let information drive your multi-phase strategy for digital asset. Very few local FIs understand the potential disruption posed by the digital revolution. Your initial reaction may be, we are waiting to see what regulators say or what is digital currency? Why is it worth anything? Why would people want to use fake money over my local FI? And you may even think our members aren’t really interested in any of this. Unfortunately, this passive and reactive approach poses a significant risk to the future of local, community FIs in this decentralized, digital era. While policy questions continue to be debated around the digital dollar, stable coins, private digital assets, etc., one thing is clear: with a modern strategy, operations, and digital tools in place, local institutions can (and need to!) play a vital and active role in the evolution of money to preserve fair, affordable, democratic, and cooperative access to modern banking products. Fortunately, DaLand’s own strategy and product roadmap are designed to lead our partners in this digital journey, generating relevant experiences that will preserve local financial services, foster financial literacy, and advance local economies. Starting with establishing a modern strategy, safeguarding that strategy, and then deploying new, value add digital interactions through the C.O.D.E. Engine, this collaborative sequence offers local FIs a more valuable, responsible, and sustainable path to stepping into digital assets versus simply diving into outsourced offerings that are devoid of value and enrich the New York brokerage houses externally holding your member's crypto rather than fostering control and use of data so that you can digitally anchor your operation as the nexus of commerce in your community.
“It’s time to move beyond the traditional electronic transaction paradigm, use data to engage in digital, economic transformation of community, and begin transforming operations to prepare for delivery and service of these *totally new* products and users.”
By now, hopefully you’re thinking, how? What can you do to remain at the nexus of community commerce in this era of digital assets, digital commerce networks, and digital distributed communities of data?
Monitor the outflow of your deposit dollars- how much of your deposits are going to apps like Coinbase, Robinhood, Kraken, etc.?
Ask yourself, did regulators ever come to the rescue of travel agents or video rental stores?
Continue to educate your team on these emerging networks, technologies, and trends so that your institution can maximize the effectiveness of decentralized energies and digital assets and position yourself as the intermediary of these networks in your communities.
Reach out to DaLand to understand how your institution needs to prepare strategically, operationally, and technologically for digital assets.
Fortunately, DaLand isn’t sitting idly by letting the future of money pass up the local institutions and cooperative financial services industry we love! For years we have been planning for this moment, combining digital tools with sound strategy and operational transformation to help promote our partners’ positions as trusted and valued connections to commerce and community in the modern, digital world. It’s time to move beyond the traditional electronic transaction paradigm, use data to engage in digital, economic transformation of community, and begin transforming operations to prepare for delivery and service of these *new* products and users.
To continue your education on DaLand’s thought leadership, paths to partnership, and product development….
Check out these latest communications: Tech CUSO CIO Sees Crypto Predication Comes True; Harrisburg University's Crypto & Blockchain Revolution Conference
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