So, you woke up to the news of the Coronavirus Stimulus Package, and you find yourself in one of four camps: (1) shocked by the news of the digital dollar and miraculous mobile central bank and merchant wallet; (2) confused about what this means for your local bank/credit union; (3) depressed about the prospect of a purposeful future for local financial institutions; (4) you believe this is simply another stimulus package, like 2008, and don’t see what all the fuss is about.
If you’re in camps 1, 2, or 4, this article is for you. Maybe you’re wandering confused around all 4 camps!
If you’re in the third camp, I’m glad to have you as a neighbor in this monumental moment. I’m not sure about you, but the fog of despair in Camp 3 is swiftly giving way to anger with each sip of my coffee, and anger can lead to action!
So, what do we do?
Well, first of all, as an industry we need pause and take an honest accounting of the fact it’s not as if we didn’t/couldn’t see this coming. The writing has been on the wall for some time now. The Libracoin scandal and congressional fact-finding mission last year, incessant chatter by central banks throughout 2019 about Central Bank Digital Currencies (CBDCs), an onslaught of innovation in the cryptobanking and cryptopayments space by Fintechs, and the rapid evolution of money and payments since the cryptocurrency craze of 2017.
A stark recollection of the above facts is essential, because any time wasted debating the actual arc of history which led to this moment will only result in squandered resources and eventual irrelevance for local financial institutions – a tragedy which would drastically and irreversibly impact democratic access to funds and alter the trajectory of autonomous and free local economies.
As of March 24th 2020, we all have a couple trillion reasons to admit we’re already living in the next era and new order of banking and finance. What we do next will determine whether our local consumers can rely on us as partners in this hyper-centralized and digitized world.
With the above context in mind, here are some things your consumers/members and community businesses will be learning (probably faster than you!) and adopting as their new norms:
Storing funds (other than dinosaur dollars) at a financial institution just (officially) became an afterthought; the rapid (fear-fueled) evolution of our financial moment ‘spontaneously’ morphed beyond the centralized and localized financial institution, making retail financial institutions unessential (even more so than they already were). The consumer’s perspective on the purpose of a financial institution irreversibly shifted from essential institution to inconvenience, overnight.
Cryptobanking and cryptopayments just went mainstream, overnight. The US Fed has (or will in the coming hours/days) intimately familiarized the American (and global) consumer with the concept of digital currency, storing/vaulting digital currency, and using digital currency and wallets to pay merchants and interact with banks. The debate about the viability of digital currency or cryptopayments is over; despite the fact many ignorant stalwarts and tragic traditionalists will continue to waste time experimenting with Blockchain for non-currency/non-payments functions (and will waste precious local financial institution capital and resources on irrelevant projects).
Your institutions most valuable member/client is now indisputably the local merchant. This new era of the digital dollar and hyper-centralized digital currency (direct digital issue from the Fed) and monetary exchange networks will mean the primary financial network is now that of the consumers and merchant. Businesses and consumers will exchange funds fluidly without need of a retail financial institution. This is no different than the reality of cryptocurrency payments, which has been around for nearly a decade; but, as noted above, the US Federal Government (your local congressman/woman) just ensured your consumers no longer need a financial institution to broker transactions, payments, etc. This means your best play as a financial institution is offering a mobile wallet to local merchants, as part of a local network and digital economy of which your FI is the epicenter, as a means of remaining relevant and valuable in the stream of digital and mobile payments.
There’s been a great deal of chatter in the past two weeks about the apocalyptic impact on local businesses stemming from the Coronavirus constraints on travel, commerce, etc., as our society enacted measures with unprecedented speed and scope to “flatten the curve” of this “invisible scourge.” One thing is certain, strong and sovereign local economies are officially an endangered species; if not because of the unprecedented grinding to a halt of our global economy and money movement, then certainly because local banks/credit unions (and their legacy payments networks of cards, checks, cash) just woke up to an extinction level event of an astonishingly megalithic scale of forced and rapid centralization of banking and money movement. If democratic, free, and local access to funds and movement of funds is going to remain an opportunity-creating reality for communities across our economy, then credit unions and local retail financial institutions are going to have to rapidly rethink their identities and value proposition in the face of sweeping shifts of political and consumer sentiment.
Don’t discount the role your local financial institution can play in ensuring the existing of strong, local, autonomous, and democratically directed/controlled transaction networks and economic ecosystems. Such may be your only value proposition as a retail financial institution in this brave new world of directly issued digital currencies and hyper-centralized Fed-controlled digital dollar transaction networks.
As of this morning, you probably need a new core processor. To be honest, you’ve needed one for a while; but, what was a decision yesterday is now an existential imperative today. If it wasn’t already, a radically aggressive core-centric approach to centralizing and processing your consumer/community data on a totally open and extensible core must become your primary initiative. No other strategic initiative is more pressing in terms of contributing to your chances of incorporating new sets of data and transaction – like digital dollras and cryptocurrency/payments networks – into your business operations. Your retail financial instiutiton (and your consumers/community businesses) need to be able to plug into the future of money, and participate in cryptobanking and next-gen payments networks.
There’s certainly more to be said this morning about the widespread ripple effects and undercurrents of this stimulus bill and its ushering in of a new digital and economic era. Our industry has a Sisyphean scope of work and unprecedented challenge of relevance ahead of us. Thus, the phone is ringing off the hook here at DaLand CUSO, and we must urgently press on in our mission to promote credit union relevance and democratic access to financial services, driven by modern control and use of data and digital engagement with local communities across our country! More to come … from DaLand CUSO and our partners.