Increasing interest in digital assets has been pushing both small and multi-international institutions to offer cryptocurrency products and services at a retail level. This was previously offered only by a few banks to wealthy and institutional clients.
The recent report on a partnership between enterprise payments firm NCR and Bitcoin (BTC) solutions provider NYDIG will permit almost 650 U.S. banks and credit unions to offer Bitcoin services to their clients, an initiative that will allow around 24 million total end users to easily buy, sell and hold Bitcoin through their bank accounts.
“We’re firm believers in the benefits of crypto and the strategic application,” Douglas Brown, NCR president of digital banking, said to Forbes. “And that’s true for our banking relationships, as evidenced by NYDIG, and across retailers as well as restaurants and the like.”
The partnership comes as banks have been witnessing a huge outflow of money from their depositor accounts to crypto exchanges and fintech firms.
“A lot of these banks have seen that one of the biggest outflows from their depositors is moving money from the bank to exchanges like Coinbase,” NYDIG President Yan Zhao said. “And so that’s part of why banks are so excited to have this capability for themselves and for their consumers.”
How will the partnership work?
The partnership between NCR, a leading payment provider, and a subsidiary of $10 billion New York-based asset manager Stone Ridge, will have two phases.
In phase one, NCR’s partnership with NYDIG will permit its banking clients to buy, sell and trade BTC through their mobile banking apps. This strategy will make bank users feel like they are directly working with their own bank. However, NYDIG on the back end will play a key role of providing actual custodian services to banking clients in return for a per-user per-month fee from the bank.
“I think you’ll see cheaper transaction fees through the banks than what you have today in the marketplace,” says Patrick Sells, NYDIG’s head of bank solutions. “But the banks do get to determine what they want that transaction fee to be.”
Brown is also of the opinion that as banks offer crypto services, it will also increase traffic to their apps, helping them promote and sell other services. Brown quoted Fintech company PayPal as an example. PayPal, which recently started permitting clients to buy and hold crypto coins, saw a 100% increase in customer visit to the app.
“Banking today is a daily or a couple of times a day activity for people, which is what we typically see,” says Brown. “Crypto gets to an hourly or sub-hourly level of deepening engagement.”
In phase two, the 138-year-old enterprise payment firm plans to take custody of its own assets. The firm will also consider blockchain and other ledger technologies to enhance its processing and transaction system. The end goal is making crypto coins a valid medium of exchange at retail shops and restaurants. According to Brown, NCR has actively been working with 200,000 restaurants and other retail clients on crypto acceptance.
Crypto adoption will further fuel NCR’s growth
Founded as National Cash Register, NCR stock price saw a whopping 163% rally in the last 12-months, thanks to investors’ confidence in its strategy of shifting its business model to NCR-as-a-Service, along with other improvements in its payment opportunities. NCR’s plan of adding crypto services is part of its new strategy to boost its revenue performance. The company is also working on the acquisition of Cardtronics, the world’s largest non-bank ATM operator and service provider.
“This transaction accelerates the NCR-as-a-Service strategy we laid out at Investor Day in December, further shifts NCR’s revenue mix to software, services, and recurring revenue, and adds value for our customers,” Michael D. Hayford, president and CEO of NCR, said.
“We have had a long-standing relationship with Cardtronics and its outstanding team,” Hayford added. “Its Allpoint network is highly complementary to NCR’s payments platform, and the combined company will be able to seamlessly connect retail and banking customers. Simply put, we are better together.”
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.