Why Fintechs and Neobanks Should Consider Offering Crypto Investments

[ad_1]

The tide of cryptocurrency is changing.

In the first quarter of 2021 alone, daily Bitcoin transactions hit the 400,000 mark, China has launched the second trial of its digital currency, and the global market size is now expected to reach $ 1087 million by 2026.

Cryptocurrencies are growing in popularity. How are fintech companies benefiting from the ability for their clients to trade cryptocurrencies? We will take a look.

Why the demand for cryptocurrency investments is increasing

Demand is increasing for three main reasons: savings rates are low, crypto promises to solve important problems, and throughout the pandemic, investors had disposable income that they sought to invest.

Ordinary investors are fed up with bank interest rates of 0.01% and stagnant government bonds. So who are they turning to now? Cryptocurrencies.

And not just retail investors, JPMorgan now allows investors to allocate 1% of their portfolio to Bitcoin, and Blackrock is opening two funds that will invest in Bitcoin futures. Cryptocurrencies are seeing 43% adoption year on year, and according to a recent survey we did with Focal Data, there has been an increase in cryptocurrency purchases over the past 6 months.

More than half of those who have ever bought cryptocurrency have done so in the past 6 months (55%). Among those who are tempted to buy cryptocurrency, the main reason is that it seems like a better way to make their money work for them than alternative financial assets (e.g. stocks, gold) or financial products (e.g. savings accounts) (43%)

Before 2020, people could argue that crypto was not an important investment class. But with institutional investors adding Bitcoin to their holdings and countries creating their own digital currencies, it’s safe to say crypto is on the rise in 2021.

Why neobanks should respond to this demand

Neobanks and FinTech companies are well positioned to meet this demand. We were already seeing fintech companies like Revolut, Square and Paypal offering cryptocurrency investments on their app. Here are three main reasons why:

It is a well-known fact that many fintech companies struggle to generate profits, especially European fintechs where trade is low.

A cryptocurrency exchange offers fintechs and neobanks the opportunity to expand into a new line of income. Fintech companies can either pack it into a premium product and charge users monthly fees or earn money on the spread between buying and selling various cryptocurrencies.

The number of crypto curious people in the world is increasing as we mentioned above, the number is 43% adoption year over year. Many retail investors want to get started with investing in cryptocurrencies and are likely to choose a fintech company that meets their needs. If this fintech company offers crypto trading, it will likely be the one it chooses.

Offering a crypto exchange is a way to respond to a new segment of people, while maintaining a competitive advantage and standing out from the quickly saturated neobank market.

Retain existing customers

Just like with new customers, an effective crypto exchange will keep your current customers happy. Customers won’t have to download and open a separate app to use cryptocurrencies – they can now do so directly from their favorite fintech.

According to a report by Mizuho Securities, 20% of Paypal users have traded Bitcoin on the Paypal platform. And since the crypto trading platform launched, Paypal has reported that its customers are logging into their app twice as much. Adding a crypto exchange is a great way to increase customer retention.

Aligning the brand with the future

Cryptocurrencies are here to stay. As an asset and a currency, they are likely to play an important role in the future of money management, monetary policy and cross-border transactions.

Fintech and neobanks are already emerging as the future of banking, the democratization of finance and the best way to meet customer needs. Therefore, it makes sense to follow through on this branding by following crypto and decentralized finance.

How to implement a cryptocurrency exchange

Currently, there are only a few ways to implement a cryptocurrency exchange as a fintech:

Build capacity in-house (a lot of time and resources)

Partner with a supplier (speeds up the process and gets you to market faster)

[ad_2]