Banks must respond to pressure to use cryptocurrency

Banks must respond to pressure to use cryptocurrency

Over the years, the number of cryptocurrency holders around the world has continued to grow. The phenomenon was also observed in France, with the largest growth since 2019.

No one can say for sure exactly how far this trend will continue in the future. However, if we compare the total capital investment with that of other investment products – if we accept that they are considered that way – the potential for development seems to be significant. Currently, the global market capitalization of all securities represents approximately $ 1,800 billion, or 14% of that of gold or 3% of that of the US stock market. A great deal of development for those who think that a secret currency can play in one court. The key question is to know which exercise dynamics can lead to this growth.

Let’s look at the French case. If stories of loss or huge profits, bubbles, compensation or fraud dominate the media, that of a new type of investment, one that excites and attracts an alternative public to that of cultural investment is undoubtedly closer to reality. This is evidenced by a recent study by a panel of 1,276 French (Simon-Kucher study, December 2021).

More than stock

The first lesson of this study: the proportion of French people (18 years and older) who have invested in secret currencies is now estimated to be around 9%. This means that the share of cryptocurrency holders in France has already surpassed that of shareholders, which was 7.6% in March 2021 according to donors from the Autorité des marchés. Even if the amount is not large, the position is real.

Lesson 2: Coin holders, as well as interested ones, are about the youngest, with 25% of children aged 18-24 and 20% of children aged 25-34 announcing their custody. Something that is exacerbated among neobank customers. The situation is usually the opposite of life insurance policies linked to the unit (UA), which are mostly held by older people (1).

As a result of this study, French secret currency holders do not have a better life than average, and this conclusion is true in terms of income and financial wealth criterion. There, too, the difference is clear from what can be seen in traditional financial savings products, where we see a clearer representation of more affluent households and assets (2).

3,500 euros on average

Among those taking the initiative, investing in secret money also appears to be the same, with more than 90% of investors declaring that they are giving less than 10% of their financial savings and 69% less than 5%. It has nothing to do with the image of a savior who would choose to invest all his savings in the hope of gaining wealth in a few days. Thus, the average investment made by the interviewed panel was around 3,500 euros.

In conclusion, it is as if cash is on the verge of becoming a savings commodity that is loved by younger generations. However, these uses appear to be rejected by banks. One-third of French investors in cryptos, for example, have already encountered difficulties in making a transfer to the platform from their banking establishment.

Banks will probably not be able to completely separate themselves from these new uses, because this population is set to be the core of their business and GDP in the coming years. It is therefore important for them to look into the evolution of their conversation.

What banks can do

Several degrees can be considered, without the need to change the worst case scenario:

– to educate clients about the financial risks that arise, especially in terms of security in the case of money held by the platform. The level of protection offered is not the same as that of the products offered by the bank;

– receipt of the balance of the secret money deposited in the bank cart to allow the customer to consult with all his financial assets. This is already provided by Boursorama via API (software application interaction);

– advice on tariffs on cryptocurrencies. The process of raising capital is still relatively complex and can lead to mistakes among property owners;

– for more knowledgeable people, informed financial advice on traditional investment products displayed in secret currencies (ETP and ETF products – goods / money sold in exchange), to undoubtedly respect the client’s risk profile;

– finally, a proposal to hold secret money on behalf of customers, as is already offered in some Swiss banks.

(1) Letter from the AMF Savings Observatory, July 2021: persons 65 years of age and older represent 25.4% of 15+ and 32.9% of direct shareholders.
(2) Letter from the AMF Savings Observatory, July 2021: households with a net monthly income of more than 6,000 euros represent 4.2% of French people aged 15 and over, compared to 15.9% of direct shareholders ; individuals with assets over 150,000 euros represent 4.5% of 15+ and 27.7% of direct shareholders.

For more, Cryptocurrency Research, Simon-Kucher, March 2022

Source link