Chaos reigns in the crypto market. Digital currencies experience more lows than highs; interest in developing crypto-based products and services has waned. However, one thing is clear: previous crypto winters have always been replaced by a crypto spring, where price growth returns. So how should banks and financial services providers face the current crisis to be well prepared for the next boom? Max Biesenbach and Simon Grabbe from global strategy and marketing consultancy Simon-Kucher & Partners explain:
Turbulent times in the crypto market. It wasn’t until early summer that several digital currencies, including crypto giants Bitcoin and Ethereum, saw what in some cases were historic lows. Bitcoin’s recent mid-August uptrend has also ended (https://www.manager-magazin.de/finanzen/boerse/bitcoin-mit-kursrutsch-kryptowaehring-faellt-unter-20-000-us-dollar- a -cac6d0c8-f41a-4bd1-a94b-612145690007). Price drops, liquidity problems and mass layoffs (https://www.businessinsider.de/gruenderszene/fintech/bitcoin-crash-bitpanda-entlaesst-hundreds-ployed/) – demand for crypto has fallen sharply in recent months and misc. Market participants with large crypto exposure face existential problems.
Nevertheless, recent years have shown that there are definitely opportunities in the crisis. Three reasons why it makes sense to look for these amid the current turmoil, and how banks and financial services firms can prepare for a new peak:
Cryptocurrencies are expanding rapidly: over 300 million people worldwide use cryptocurrencies. Blockchain.com (https://www.blockchain.com/wallet) alone has created more than 84 million crypto wallets that allow customers to buy, sell and earn cryptocurrencies. In all likelihood, the number of wallets will continue to grow rapidly as long as there is no comprehensive regulatory ban, as in China since 2021 (https://www.faz.net/aktuell/finanzen/chinas-verbot-von-krypto- anlagen-bitcoin-is-unimpressed-17557892.html), enters.
So far, banks have hardly participated financially: an estimated one to two trillion US dollars still lie outside the banking system in cryptocurrencies. The collective loss in potential fee and spread income for the global banking system is in the billions, according to expert estimates. Crypto wallets also have the potential to make banks in the payment value chain part of the business contentious and thus also secure billions in future revenue loss.
Bank customers are increasingly asking about crypto as an asset class: Last but not least, more and more securities customers expect their banks to offer cryptocurrency investments and related advisory services. Due to the high volatility, the business is often at odds with the banks’ risk-averse image, so the demand has so far mainly been met by “new market participants”.
For banks and financial service providers, it is now important to review the introduction of an appropriate crypto offering to be well prepared for the next boom. The following questions must be asked:
1. Which product and industry is best to launch a crypto offering? Here it is important to consider whether, for example, the provision of wallets in wealth management, trading of cryptos in the retail space or tokenization of assets in corporate and investment banking should be promoted.
2. Does the target customer base express an economically relevant need for crypto offerings? A German private bank recently estimated a short-term inflow of funds of ten million euros for a new asset class – too small a volume for a profitable business model.
3. Should customers be able to invest in crypto directly or indirectly, for example via funds? The financial advantages and disadvantages must be carefully weighed against each other.
4. “Make, buy or partner?” Crypto offers to customers can also be realized through strategic partnerships (for example: cooperation between N26 and Bitpanda (https://finanz-szene.de/fintech/n26-kooperiert-bei-seiner-krypto-offensive-mit-bitpanda/ ) ).
While the focus on crypto may seem counterintuitive at this point, banks are facing a unique opportunity right now: crypto talent is available and crypto companies are open to partnerships.
Simon-Kucher & Partners, Strategy & Marketing Consultants: Simon-Kucher is a global management consulting firm with over 2,000 employees in 27 countries worldwide that achieves sales increases and growth for its clients by optimizing their pricing, sales and marketing strategies – long-term and consistently . With over 35 years of experience in revenue generation and pricing, Simon-Kucher advises teams of experts to companies of all types and from a wide range of industries worldwide.
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Original content from: Simon-Kucher & Partners, transmitted by news aktuell
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