Non-Interest income Is At Risk

ST. PETERSBURG, Fla.—There’s another reason credit unions should be keeping their eyes on cryptocurrency, according to one expert– it may eventually affect non-interest income, especially from debit cards and ATMs,

“(Treasury Secretary) Janet Yellen and (Federal Reserve Chairman) Jerome Powell are very interested in central bank digital currencies, having the U.S. dollar issued in digital form,” noted Lou Grilli, senior innovation strategist at PSCU. “It would be stored in a wallet, just like Bitcoin.”

Grilli said that could have an impact on debit usage by consumers.

“Imagine your credit union members now walking into the credit union and making a deposit or withdrawal to or from my central bank digital currency. I am using the digital dollar instead of my bank account,” he said.

And what happens to ATMs? Grilli asked.
“Do I need a physical ATM anymore to go and get cash when I have a virtual ATM where I just transfer money from my account into my digital wallet?” Grilli asked. “That starts to have an impact on debit, but where it really makes an impact is on the use of cash and checks.”

Support Likely from CUs

Grilli believes such a shift would not be opposed by credit unions, as the use of checks and even cash costs the credit union money.

“This could begin to change the way financial institutions do business,” said Grilli. “Members could begin to use the central bank digital currency more through an API, or through their digital wallet.”

Grilli said while such a shift is likely further down the road, credit unions would be wise to be paying attention now.

“When I'm looking into my Magic 8 Ball, I see a hodgepodge of cryptocurrencies start to become more mainstream,” he said.

What will also likely help spur even greater consumer interest in crypto will be with “edge cases,” suggested Grilli, such as cross-border payments or purchases.

“People who work in one country sending money to another to a family member--that's a very expensive proposition,” Grilli noted. “As long as the parties on both sides can use the digital dollar, buy it on one side and sell it on the other…”

Grilli emphasized credit unions, even if they are not paying attention to digital money, cannot afford to completely ignore cryptocurrency.

Questions From Dad

“There is a lot of mainstream interest in cryptocurrency,” said Grilli. “Especially when Mark Cuban is promoting its use. It’s gotten to the point where my dad is asking me about cryptocurrency. Credit unions are in a great position to help their members by educating them on cryptocurrency, helping them understand this is not like putting money into a CD or money market account. This is a highly speculative investment, and they should go into it wisely. That's how credit unions can best help their members now.”

But in order to help themselves now and in the future as cryptocurrency becomes more mainstream, Grilli believes CUs need to be thinking about how to begin to replace debit income.

“Credit unions are always looking at protecting non-interest income,” said Grilli, reminding that overdraft income has been declining. “What has me a little bit intrigued is the concept of credit union offering a digital wallet to allow their members to invest in cryptocurrency. That's just one example of what they might do. That would be an opportunity for credit unions to replace some non-interest income that goes away.”

Selling Equities

Grilli also suggested credit unions might consider more brokerage services, where members could buy and sell equities, parallel to cryptocurrency.

“Allowing members to dip their toes into the water, with the credit union making money off the exchange,” he said. “The shift to a greater use of cryptocurrency and the emergence of the U.S. digital dollar, I believe, is definitely coming. Of course, we can debate when it will happen, especially the move of the U.S. dollar to digital form and stored in a wallet—that is definitely going to happen. Janet Yellen and Jerome Powell are both talking about this. China is leading the way here, and Great Britain is moving forward. But no reason the U.S. can’t catch up.”

By Ray Birch CUToday