Money20/20 Insights: Why Fintechs and Neobanks Should Consider Offering Crypto Investments

Eddie Robb, commercial director at Zumo, discusses one of the main themes at the recent Money 20/20 conference in Amsterdam.

The recent Money 20/20 conference in Amsterdam attracted fintech’s heavy hitters, and not for the first time cryptocurrencies were a hot topic on the agenda.

Is it any wonder? This year, the total market value of digital assets surpassed $2 trillion (£1.46 trillion) for the first time, with Bitcoin, Ethereum and a swathe of other currencies posting all-time highs.

Europe: The Crypto Continent

It’s safe to say that, when it comes to crypto, Europe has been well represented on the international stage. According to a new study by blockchain forensics firm Chainalysis, the continent constitutes 25% of global crypto activity, with the UK leading the pack. Between June 2020 and July 2021, Brits received $170 billion (£124.7 billion) worth of digital assets, a reflection of growing retail and institutional interest.

The astronomical growth of the decentralized finance (defi) sector, with its liquidity pools, automated market makers (AMMs) and interest-bearing savings accounts, has sucked a tremendous amount of liquidity into the industry over the past 18 months. In fact, defi protocols accounted for almost half of the UK’s crypto activity in the past year.

But it’s not just crypto-native protocols that are thriving; payment giants from tradfi, not least Visa and Mastercard, have rolled out or announced plans to support digital currencies. Indeed, Visa is currently looking at creating a universal payment channel (UPC) to support stablecoin and CBDC transfers.

Mastercard, meanwhile, just purchased blockchain analytics firm CipherTrace. In a statement, the company said the acquisition would help its customers protect themselves and comply with regulations as they begin to expand their own crypto ecosystem.

Whether it’s due to long-established payment giants like Visa or Mastercard, or mid-tier fintechs like Revolut and Wirex, adoption among ordinary people is increasing. And we haven’t even mentioned gamefi, a growing sector that merges gaming with defi via a play-to-earn model. But that’s another topic for another day.

Open banking was another much-discussed subject at Money 20/20, with attendees eagerly debating how best to connect banks and third-party providers, and to reduce payment friction while boosting consumer confidence. In my view, open banking could represent a tremendous leap forward in consumer convenience and trust in crypto, while working to the advantage of forward-looking fintechs who get it right.

Four Compelling Reasons

If the Money 20/20 chatter failed to convince you, here are four compelling reasons why fintechs and neobanks should consider offering crypto investments straightaway.

  • Win new customers

Global crypto adoption has grown by over 2,300% since Q3 2019, and by over 881% in the last year. With this in mind, fintechs who shy away from crypto are excluding an inordinate number of potential customers.

There is also the risk that, over time, those who eschew crypto will increasingly be perceived as relics of tradfi, entities entirely at odds with the zeitgeist. Embracing crypto and defi will help them stay relevant.

  • Hold onto existing customers

Many fintechs cling to the adage “If it ain’t broke, don’t fix it”. But a contented user base mightn’t stay that way forever. Crypto-curious customers who crave convenience will appreciate the ability to buy, sell and convert digital assets from within their app, rather than having to sign up for and download a separate application.

Case in point: PayPal. Did its user base shrink when it rolled out support for crypto trading? On the contrary, its number of active accounts are up 16% since March, with almost one in five users having already traded Bitcoin in-app.

  • Drive revenue

Let’s be honest, neobanks, fintechs, payment processors, and multi-asset brokerages aren’t supporting crypto just to put a smile on users’ faces. They’re making a calculated business decision, catering to demand while boosting their bottom line, whether from subscription fees or the spread that flows into their coffers when digital assets are bought and sold.

One of the biggest recent winners in this space was Square, whose Cash App generated $2.72 billion (£2 billion) of Bitcoin revenue and $55 million (£40.3 million) of Bitcoin gross profit during Q2 – an annual increase of 300%.

  • Capitalize on trends

Crypto itself isn’t a trend – it’s here to stay. The NFT space, however, is a little different. Non-fungible tokens representing digital art, in-game collectibles, virtual real estate, and countless other commodities are highly speculative investments, but demand continues to grow. The fact that eBay recently moved to allow the sale of NFTs on its platform legitimizes them further.

While fintechs have thus far stuck to offering support for long-established digital assets like Bitcoin and ETH, it’s not inconceivable that they’ll eventually embrace NFTs in a bid to challenge the marketplaces and cryptocurrency exchanges currently meeting the demand.

In the digital age, fintech firms that fail to adapt are risking their own obsolescence. Whatever way you look at it, integrating crypto is a no-brainer.

By Eddie Robb, commercial director at Zumo, an Edinburgh-based crypto wallet and payments platform.

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