By W.B. King
Noting the 2023 “crypto winter,” Co-op Solutions Chief Strategy Officer Dean Michaels contends that there is still interest in this digital currency model among credit unions.
“While future credit union adoption rates are pure speculation, research suggests that 50% of crypto-aware consumers are interested in their financial institution offering access to cryptocurrency, which should get credit unions’ attention,” said Michaels, who referenced the 2022 Visa report The Crypto Phenomenon: Consumer Attitudes & Language.
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.
To provide a “safe and compliant” cryptocurrency trading platform, Michaels further explained that Co-op Solutions and NYDIG announced a new partnership at the 2023 Governmental Affairs Conference (GAC), which took place in Washington, D.C., beginning in late February.
“The response at GAC was fantastic. Credit unions have been diligently reviewing the opportunity to integrate a digital asset solution for their members, but many admitted they had not yet found a provider focused on compliance and risk management such as NYDIG,” Rahm McDaniel, head of platform solutions business development for NYDIG, told Finopotamus.
“We were pleased to find several credit unions eager to provide their members with exposure to digital assets that decided to move forward with NYDIG after the GAC,” he added.
The New York City-based NYDIG, which first began working with credit unions in 2021, provides digital asset solutions for credit unions via a digital asset platform that enables members to buy, sell, and hold digital assets through its credit union’s digital banking interface.
Strategic Provider Program
NYDIG was one of three fintechs that have joined Co-op Solutions’ newly launched Strategic Provider Program (SPP), which was designed to give credit unions access to pre-vetted, best-in-class products and services outside of Co-op’s core offerings, thus helping to streamline procurement processes, noted Michaels.
“Co-op’s partnership with NYDIG further reinforces our commitment to identifying best-in-class providers in markets that represent opportunity for credit unions,” Michaels told Finopotamus. “NYDIG has built its reputation by meeting the highest compliance, audit and governance standards and has interacted with the NCUA on many digital asset issues.”
The NYDIG deal follows the first two partnering companies, Origence and SavvyMoney, all of which attended GAC.
When Finopotamus asked how exactly SPP works, Michaels said it’s a free referral partnership initiative that was developed based on feedback from Co-op Solutions’ clients.
“They were telling us that they do not have the time, resources or in-house expertise to properly assess and compare vendors, nor the scale of Co-op to negotiate favorable contract terms,” he explained.
To further illustrate his point, Michaels offered the following example: “Say your credit union needs a direct account opening/loan origination solution, which SPP offers through our partner Origence,” he noted. “The credit union would fill out an inquiry form on our website for Origence and in turn receive Co-op’s detailed due diligence summary on Origence.”
The summary aggregated information is built from the credit union’s RFI/RFP submission, which includes a “rigorous evaluation of Origence’s solution capabilities and quality” as well as the overall company’s “commercial maturity and enterprise risk profile,” he added.
“In addition, the credit union is entitled to preferred commercial terms that Co-op has pre-negotiated on behalf of our clients,” he continued. “The result is a streamlined vendor procurement process for the credit union, all with the comfort of knowing that Co-op has carefully pre-vetted and exclusively endorsed the provider from among a competitive peer group.”
Digital Assets Compliance Leader
With regard to the NYDIG partnership, both Michaels and McDaniel addressed compliance, audit and governance standard concerns that grew into a chorus of doubt after the FTX and BlockFi debacles in late 2022.
“NYDIG is highly differentiated as a vertically integrated, regulated, and audited provider in the digital asset industry offering financial institutions a superior white-label digital asset platform that includes both trade execution and 100% cold storage custody,” McDaniel said. “NYDIG has also created a streamlined onboarding process for both credit unions and their members.”
The industry’s leading financial institutions, including digital banking software providers Alkami, Allied, CSI, FIS, Fiserv, Q2, NCR, and Jack Henry, trust NYDIG’s risk management approach, McDaniel affirmed.
A “major factor” in Co-op Solutions’ selection process of NYDIG, Michaels explained, is its “industry leader status” in regulatory compliance for digital assets.
“There are many reasons why NYDIG is different from, say, FTX, but to name a few — they do not commingle clients’ custodied assets with firm assets; they are regulated by the most demanding digital asset regulator today (the New York State Department of Financial Services); and they are audited by a Big Four firm,” Michaels continued. “For credit unions, this means they can provide a service their members want via their digital banking experience, all in a safe and compliant manner.”
A White Glove Streamlined Onboarding Experience
There are approximately 35 credit unions currently launching on the SPP digital assets platform. When asked if there are certain characteristics, such as location, asset class or demographics attracting these credit unions, Michaels said there are certain similarities.
“The main organizational characteristic we’ve seen in credit unions that leverage NYDIG are that they are innovative, forward-looking and typically larger institutions that have prioritized listening to their members and their ever-evolving needs,” he said.
“Also, these credit unions have analyzed and acted upon their data that showed members’ deposit outflows going to third-party cryptocurrency trading platforms,” Michaels continued. “We are also impressed by NYDIG’s extensive pre-built digital banking integrations that allow for streamlined onboarding for thousands of credit unions and a white glove support model for every stage of the client lifecycle.”
