By W.B. King
Discussions around cryptocurrency adoption rates have been mostly academic in recent years, but theory has morphed into reality with more than 30,000 cryptocurrency ATMs in operation in the United States, according to CoinATMRadar. And this figure represents a jump from roughly 14,000 machines globally at the end of 2020 to approximately 34,000 at year-end 2021.
What does this trend mean for credit unions? Finopotamus reached out to three companies in this space for guidance.
“My view is that credit union leaders need to be defining their [cryptocurrency] strategy yesterday and if they are not, they are rapidly falling behind,” said NCR Corporation’s Chief Technology Officer and Senior Vice President of Software Tim Vanderham.
Counting more than 1,600 credit unions as clients, the Atlanta-based consulting and technology company provides professional electronic products, including ATM software and hardware services.
“We ran a Harris Poll to some consumers and three out of five (62%) said they would prefer their credit union or financial institution to be where they go to get crypto,” Vanderham said. The referenced poll was conducted from October 28 to November 1, 2021 and surveyed 2,035 U.S. adults ages 18 and older, among whom 1,856 have a primary financial institution.
“So for this reason alone – consumer engagement – is why leaders of credit unions have to start thinking about this even if they don’t implement it right away…but they need to know the data and how much money is leaving their front door,” Vanderham noted.
NCR is not just providing analysis on the trend, but has become an integral player in the cryptocurrency ATM market. In January 2022, the company announced that it officially acquired LibertyX, a leading cryptocurrency software provider.
“The completion of this transaction enhances our ability to provide digital currency solutions and capabilities that help run our customers’ businesses,” said Don Layden, executive vice president and president, payments and network, at NCR Corporation.
Layden explained that the LibertyX digital currency solution runs on ATMs, kiosks and point-of-sale (POS) systems today. LibertyX will partner with ATM operators, like NCR’s Cardtronics, which owns and manages ATMs and the Allpoint network in the U.S. at locations, such as convenience stores, pharmacies and supermarkets. Moving forward, NCR will utilize its Pay360 platform to offer the LibertyX capabilities as part of its solutions for banks, retailers and restaurants.
“We acquired LibertyX to ensure that we would have a set of intellectual property and software assets that would facilitate this digital currency and digital asset ecosystem,” said Vanderham.
While he added that cash, checks and credit will likely never die, he said, “We now have another form of an asset called digital currency, which will be so important to our customer base and we will continue to invest in that acquisition.”
Over the course of the coming year, Vanderham expects LibertyX to be running on more than 50,000 physical end points and available to the company’s 26 million digital banking users. Currently, many of these end point ATMs have been in places like Rite Aid and CVS locations, but he said to be on the lookout for machines in banks and credit unions, too.
“We are working with a number of financial institutions, credit unions and banks as to how they light this up at their branded kiosk (through NCR’s Cardtronics platform) and some banks and credit unions want this on their physical ATMs as well or at a teller window in their branches,” he said.
Noting nascent cryptocurrency usage, the fear of the unknown and uncertain regulations, Vanderham said there will be more hurdles to jump, but by the middle of 2022 he expects to see many more financial institutions with branded cryptocurrency ATMs.
“NCR is not going to take a stake on what regulations should look like – we leave it up to the regulators – the bodies that define this,” he said. “What I can guarantee to our customers is that whatever the regulators settle in on, and whatever frameworks or guardrails they give us, we will be compliant and a trusted technology partner.”
Co-op Solutions, formerly CO-OP Financial Services, is carefully observing the ATM cryptocurrency space, explained Director of Product Management Terry Pierce.
“Market trends indicate that more Bitcoin ATMs are being deployed. Co-op continues to monitor this trend to understand credit union appetite and potential operational and compliance issues to which credit unions will need to adhere,” Pierce said.
The Rancho Cucamonga, Calif.-based CUSO operates an interbank network connecting the ATMs of credit unions in the United States and is cited as the largest credit union-owned interbank network in the country.
Referencing the CoinATMRadar statistic signaling a huge spike in cryptocurrency ATMs over the last year, Pierce said this trend reflects “consumer demand” in a “dynamic payments” industry.
“Credit unions are curious by nature, while at the same time ensuing complete focus on the safety and well-being of members. The credit union space has different approaches to dramatic shifts,” Pierce said. “Some larger credit unions will likely seek to understand, while other smaller to mid-size institutions may take a wait and see approach. Regardless of size, general understanding of all implications, especially for the member, is recommended in future considerations.”
Pierce added that Co-op Solutions currently does not have any cryptocurrency ATMs in its 30,000-plus surcharge-free fleet.
“Market changes such as Bitcoin will involve all contributors to the payments ecosystem, including ATM manufacturers, software releases, compliance and processor partnerships to enable a, industry standard solution,” Pierce continued. “Co-op has strong partnerships within the kiosk space as we continue to monitor credit union and consumer demand for services at the ATM.”
For credit union executives contemplating the pros and cons of adopting cryptocurrency ATMs, Pierce said it is important to understand the security, regulatory and technology implications.
“Co-op is committed to partnering and understanding all aspects of introduction into the credit union services set. The creation of standards aligned with compliance will be a key step toward enablement,” Pierce said. “We intend to understand the evolving payments space with rigor, and implications for all parties.”
Crypto-Curious: Be Proactive but Leery of Scams
PSCU’s Senior Innovation Strategist Louis Grilli pointed to the recent Super Bowl advertisements as “proof” crypto has reached the mainstream “zeitgeist.” The Tampa, Fla.-based payments CUSO, supports more than 1,900 financial institutions, representing more than 7 billion transactions annually.
He noted four commercials, including Larry David’s FTX “Don’t Miss out on Crypto” comedic spot as well as ads for eToro, crypto.com and Coinbase.
“These ads, and other hype, such as tweets from Mark Cuban and Elon Musk, have increased the category of the ‘crypto-curious.’ These are individuals that would like to dabble, whether it be from fear of missing out (FOMO) or because they believe crypto investing as a positive addition to a savings portfolio,” said Grilli.
It's for these noted reasons, among others, he said, that credit unions are starting to offer “buy/sell/hold” capability through credit union branded online and mobile banking apps. PSCU, he noted, is also looking into this offering.
“We are in several discussions regarding the bigger trend of crypto purchases. We are in discussion with crypto exchanges to offer a buy/hold/sell capability to our owner credit unions to be incorporated into their mobile and online banking,” he continued. “We are also in discussion with our ATM driving processing partner and others to see what financial institutions might do in this space. A conceivable addition to smart ATMs owned by credit unions is to extend the crypto capabilities, when they are added into mobile banking, to also be added to ATMs and ITMs, alongside standard banking functions.”
This strategy, he said, would allow members to purchase, monitor and sell Bitcoin within a compliant, safe and potentially lower fee alternative,” he continued. “Venmo, Cash App, PayPal, and other popular apps also offer a very simple buy/hold/sell capability.”
Grilli cited a stat from Motley Fool noting fees to purchase cryptocurrency from ATMs range from 9% to 12%.
“Credit unions can offer transactions for around 2%,” Grilli said. “As of today, Venmo is waiving all fees for crypto purchases in-app.”
There are, however, cryptocurrency ATM issues that could slow adoption rates, Grilli noted. The level of “sophistication” of this type of transaction, he added, goes well beyond the casual “crypto-curious” person.
“In order to receive the crypto, the person at the ATM must already have a crypto wallet (or needs to create one then and there). Then the ATM user must present the wallet, either by providing a string of letters and numbers, or in some cases scanning a QR code to have the crypto deposited in the wallet,” Grilli said. “This is far more difficult than tapping the “buy crypto” in Venmo or in the credit union’s mobile banking app.”
And if using cash, he said that the ATM purchase can be done in complete anonymity. While this is not important to the typical credit union member, he said this feature is “growing increasingly attractive” to drug dealers, human traffickers, and anyone else looking to launder money.
“In a recent CNBC report, the fraud has become more pervasive as Bitcoin ATM installations in the U.S. have skyrocketed in recent years. In addition, using a stolen or fraudulent debit card to purchase crypto is on the rise,” he continued. “And even though the blockchain is a public ledger, all it would show is that the bitcoin was purchased by the person whose name is on the debit card, despite the fact that that person did not authorize the transaction. And once purchased, the transaction is immutable.”
As is the case with all technological advancements in the credit union space, and despite certain drawbacks and concerns, Grilli’s take on cryptocurrency ATMs is to be proactive.
“Credit union senior staff, especially chief compliance officers, should be monitoring this space. The crypto industry is evolving very quickly, far faster than regulation can be formed. Consumer interest is also on the rise, with more than three in 10 Americans already owning cryptocurrency,” he continued. “Credit union members should be provided education regarding risks, and more importantly, about scams. Credit union members need to know that being directed to pay a non-trusted person using one of these third-party Bitcoin ATMs may likely be the victim of fraudulent activity.”
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