FIS Blog

Developing an innovative digital asset strategy

Maria Schuld | Division Executive, Americas, Banking Solutions

August 01, 2022

As bank executives fight declining margins and competitive pressures, community and regional bankers must seek ways to retain customers, deepen relationships and attract new customers. Innovative new sources of revenue in untapped markets may help banks improve margins, ease competitive pressures and continuously improve relationships with existing and new customers.

Innovate with the digital currency opportunity

According to the Raddon Report, financial institutions care about cryptocurrency because consumer interest in the digital currency continues to grow. Currently, 36% of all consumers indicate they are very or extremely aware of cryptocurrency. Most notably, 57% of millennials and Gen Z are very or extremely aware of cryptocurrency, and another 30% are somewhat aware.

Regardless of their size, no bank can afford to ignore this growing marketplace. Perceptive bankers must assess the demographics within their marketplace and assess the extent of their appetite and willingness to participate in the cryptocurrency market.

The immediate opportunity

With a digital-asset-offering relationship, banks can provide their end customers with the ability to buy, sell or hold digital assets. An offering in digital assets can provide bank customers with assurances their banking partner can help them participate in a new type of financial network.

Recent research from Cornerstone indicates banks have a significant opportunity to provide bitcoin access to their customers. Most consumers, 60% of those currently owning a cryptocurrency, would use the ability to invest in digital assets through their bank.

A variety of opportunities emerge for financial institutions that can function as trusted advisors and service providers for their customers. The following use cases offer a range of starting points.

Components of a digital asset strategy


Buy-hold-sell

With a digital asset offering, bank customers can purchase digital assets through their trusted banking partner and fund their purchases from their bank accounts. A bank’s core technology partner should provide pre-built integration for conducting buy, sell or hold transactions between the banking ecosystem and the regulated bitcoin (BTC) trading and custody partner.

In this type of arrangement, the partner provides custody services and helps facilitate execution of the bitcoin transactions; the bank never has to hold or trade bitcoin, but the bank maintains their primary relationship with the customer. Income generated from these transactions helps to grow fee income, a source of revenue currently under great pressure.

As Ciaran McMullan, CEO of Suncrest Bank, expressed in a recent article in S&P Global:

“For Suncrest, we see this as a way to be innovative and responsive to changing customer needs and the changing demographics in our customer base. In the long term, we see it as a good potential noninterest-income business line.”

Digital asset rewards

Reward programs generate customer loyalty and help build core deposits. But travel points and cash-back programs are getting stale. Banks that consider rewarding customer debit card activity can not only stand out within a crowded field, they can also offer a relatively low-risk way for customers to explore the brave new world of digital assets.

One community bank offers such a program, paying a simple 1.5% on purchases in the form of bitcoin rewards. Customers can keep the bitcoin as a store of wealth or redeem them for US dollars with full redemption available monthly.

BTC interest payments

Banks have traditionally used interest on checking and savings accounts to attract and retain customers. However, over the past decade, banks have found it increasingly difficult to provide competitive interest rates for customers. Opportunities to create deeper client engagement may exist by bundling conventional banking products with cryptocurrency instruments.

One example is an interest-as-bitcoin program whereby the end customer elects the option to receive interest earned on a CD or savings account and have the interest credited toward their digital custody account as bitcoin.

With a bitcoin interest program, banks can offer economically viable interest payments to customers while the customer earns cryptocurrency in a frictionless fashion. An innovative customer attraction and retention strategy with differentiated interest payments is made possible with digital assets, opening the door to numerous opportunities bundling conventional banking products with cryptocurrency.

What’s needed to start

To explore any of these use cases, bankers should first take an open and transparent position with their regulators. To that end, financial institutions should consider aligning with a processing partner who can bring to the relationship a proven history and experience navigating both state and regulatory agencies in areas of digital currencies.

Communicating with regulators and initiating a prudent approach to exploring the digital asset market positions your bank to start taking advantage of a new and emerging win-win opportunity with your customers.