- Jon Ungerland - CIO, DaLand
Crypto Wallets, Savings Bonds, and the Community FI Desert In-Between ...
A recent breakfast conversation with my 8-year-old son made me wonder if he’ll ever have an account at any financial institution.
Here’s what happened, instead of a CU: in less than 5 minutes, my son had a crypto-wallet synced between his phone and Chromebook, and I had transferred his initial C.A.R.E.s payment to him in XRP (the transfer cost me a fee of a few cents; more on my son’s 8y/o version of “C.A.R.E.” relief package, below). My son immediately began watching XRP fluctuate by double digit % yields in the first week … returning him something like .20 cents on his $8 balance in his first days as a distributed financial services rebel and benefactor.
As an FI exec or leader, stop and think about that. There’s an entire financial system infrastructure and world out there where an 8 year old can learn about capital, yield, digital payments, and outpace any APY at any FI in our nation at little/no cost to him (or me); but potentially extinction level cost to an entire (noble) industry!
Background: I’ve been a benefactor of and contributor to the credit union movement since I was about 12 or 13 years old. As my LinkedIn profile and other public comments I’ve made have illustrated for years, I believe the fundamentals of the credit union movement are the ready-made solution to the problems of democratic access to affordable financial services; and credit unions can be the epicenters of revitalized 21st century community economies.
That doesn’t mean credit unions will be any more relevant to today’s consumer (let alone tomorrow’s) than a savings bond was to me as a young millennial in the 1980s.
Here’s the story, and the perspective: like many families, ours is navigating the changes in routine associated to our “new normal” onset in March 2020 and the events surrounding COVID. Remote schooling and continual disruption to in-person activities has led my wife and me on a seemingly endless search to keep our son doing anything besides the default daily circuit – Netflix, Hulu, Roblox, Disney+, and “I’m bored.” So, we created a concept called “C.A.R.E” – Chores, Available Time, Reading, Exercise. For each day my son “cares” about his own mental, physical, and social/communal health, he ‘banks’ $2. His own personal “C.A.R.E.S” bailout financed by his own personal central bank! I’m sure all parents will agree the $2 a day is a nominal investment into sanity and some semblance of routine and progress in this post-COVID world!
Here’s the problem: he’s not actually “banking” his C.A.R.E money. He’s not putting it at a credit union either. We tried. My wife and I, both as lifelong technologists and advocates in the CU space, immediately tried to create a sub-user for our son and assign him to a secondary share … at BOTH of our credit unions (Top 5, and Top 100, nationally). Before you rush to say, “But my online banking vendor could support that,” consider you’re seeing masts of the approaching ships as simply very flexible trees. Even if the platforms credit unions rely on for relevance could’ve supported what we were attempting (as a means of introducing our son to decentralized/local financial services), I quickly realized I’d be doing my son two great disservices had I just found him a CU with a sufficient online banking vendor to feign relevance: (1) I’d have locked him into exponentially lower rate of return on his C.A.R.E money; and (2) I’d have robbed him of awareness of where financial services and money is actually moving (into the future of which HE will be a larger part than me, or any of us as the current ‘leaders’ in that space).
I do, after all (both as a parent and a CU lifer) have an obligation to promote financial literacy!
Here’s the current events of concern: None of this is new news. It’s all just the latest developments in trends that have been building for years. Yet, like disease, disruption symptoms eventually collect into catastrophic system failure, overloading the aged body! Here’s a scan of the spread of symptoms within our body, just within the last few months month or so: (1) US Congress contemplated distributing Federal C.A.R.E.S relief fund via Fed Direct digital wallets tied to a central bank distributed ledger; likewise, (2) regulatory authorities in Washington D.C. finally decided (admitted) Bitcoin is currency; meanwhile (3) Kraken (a top US cryptocurrency exchange) secured a financial charter by taking advantage of legislation in the financial wild west (still full of pioneering opportunity!); and while deposits come under attack, (4) Decentralized Finance (DeFi) has seen parabolic boom since March 2020 (touting advances in ‘financial inclusion’ through such adoption); while (5) Coinbase (the nations largest digital currency exchange) has entered the loan to share leverage business and is now offering loans secured by cryptocurrency.
Again, these are just a few of the recent events which make me brazenly outspoken against the predictably stalwart objections and curmudgeonly denials from ‘leaders’ in our industry. Say nothing of the vendors constraining the community relevance of our industry, costing our industry dearly (potentially our entire relevance to future generations). In the face of such compounding and commonplace evidence, objections like “bitcoin isn’t money,” or scoffing at “the crypto bubble,” and distractions like “blockchain is for member authentication” are not only distractions, they’re roadblocks to future relevance.
My son’s dinner table observations about pasta once added some simple perspective regarding the perils of platforms and technology in the financial services world. His own recent development and drive to be a contributing member of society, and the technological and payment realities surrounding that, have now confirmed the world has quickly moved way beyond our traditionalist notions of relevant financial services products for the next generation – i.e. youth checking accounts, youth debit cards, ATMs/ITMs in schools, youth educational tools online, etc.
Per our predictions for quite some time, the world has moved onto a reality where data is money, and money is data.
From where I sit (and especially from my son’s seat, or pocket where he keeps is mobile device), a credit union (or bank) account probably looks as relevant and natural to my son as savings bonds looked to me when my grandparents gave them to me as a kid! Why would I, or why should he, take a lower rate of return on a piece of paper at a ‘bank’ over 30 years’ time when I/he could put the money outside ‘the system,’ invest it into myself, and produce a greater yield outside some government or centralized infrastructure? Yes, yes, b/c it’s insured. Yep; insured and backed by faith in a government with $23T in debt, with the printing press set to “T – Trillion” batches for the foreseeable future.
I’m glad I also studied philosophy and theology; a skill useful for finding a worthy ultimate reality for my faith!
Fortunately for me I also found a relative that cared about my financial future and relevance; there was that one grandparent who understood what was important to my future as a kid of the 1980s, and he took me to a credit union which offered educational classes, savings accounts, and ATM cards to kids. In the 1980s and 1990s, that credit union kept up with the times; which meant I could deposit my lawn mowing and paper route money with them (instead of using it to fund 30 years of debt and deficit for the Feds).
I hope our industry can get out of the 1990s (early 2000s at best), so my son sees a reason to trust a local partner and institution with his assets – digital, physical, fiat, or whatever becomes essential to his financial flourishing.
That hope is why I get up and do the work I do at DaLand CUSO, every day.
I’m certain there are FIs out there who want to be part of the future of money, and at the epicenter of financial flourishing for their community – digital, physical, or whatever local innovation keeps community economies flourishing and free!