Banks should forget crypto payments, identify use cases

As crypto continues to gain traction with banks and financial institutions, experts are cautioning against moving away from its traditional use cases.

Banks as diverse as $1.6 trillion Goldman Sachs and $122 billion Signature Bank have dipped their toes into the cryptocurrency pool, with Goldman Sachs originating its first Bitcoin-backed loan in April and Signature Bank holding $29 billion in cryptocurrency deposits within its blockchain-based Signet platform, according to its first-quarter earnings release. 

But as financial players increase focus on crypto’s non-traditional capabilities and companies like Microsoft and Intuit enable full-scale crypto payments, the crypto use case for banks as a payment rail remains questionable at best, Gilles Ubaghs, Aite-Novarica strategic advisor and payments analyst, tells Bank Automation News in this episode of “The Buzz” podcast. 

“Bitcoin, if you judge it purely as a payment tool, is pretty terrible,” Ubaghs says. “It's complicated to use the onramps and it's not that cheap. The volatility of pricing, everyone knows very well. But when you look at things like the speed of a transaction, Bitcoin’s transactions per second are about seven. Visa and MasterCard, they're in the 1,000s.”

Crypto’s applications as a tradeable speculative asset, along with the tangible security applications of the blockchain, are worthwhile and should be tapped by banks, Ubaghs says. But before deploying boatloads of cash to create the next payment revolution, he advises banks to step back from the buzzwords and identify the use case at their institutions. 

“My biggest advice to all banks today is to really take a look at what does this actually do,” Ubaghs tells BAN. “What problem does this solve? What does this do that can’t perhaps be solved better by another technology?”