In this time of constant change, the cutting edge can come from seemingly unlikely places.
Wedged between megabanks and a number of up-and-coming fintechs, the family-owned Vast Bank is trying to differentiate itself by becoming one, if not the first US bank to offer cryptocurrency services directly to retail customers.
The move in which the Tulsa, Oklahoma-based nationally accredited bank partners with the crypto exchange platform Coinbase to provide integrated cryptocurrency services completes a five-year digital transformation around SAP business software.
Founded 40 years ago as Valley Bank, the bank is committed to a crypto-friendly financial future in the USA. To capitalize on, Vast switched to a core back-end system from SAP that supports multiple currencies, cryptocurrencies, and customization features to expand support for other digital assets, says CIO Stephen Taylor.
“In the past five years we have been on the way to building our technology platform based on a [banking] Core, which is used by many of the big money center banks in Europe, ”Taylor told CIO.com, noting that, for example, 70% of the transactions at the Commonwealth Bank of Australia and Deutsche Bank in Germany go through core banking Platform run by SAP.
“We were the first bank in the US to introduce [SAP’s core banking] So we localized it in the US and built a number of technology components on top of it, including a number of APIs and open APIs that are used in open banking in Europe to prepare for what we believe is the next trend in open banking, ”says Taylor.
The result of this transformation has convinced Taylor that Vast Bank will be the first US bank to offer retail customers the integration of core banking services with the ability to buy, sell and manage cryptocurrencies.
David Furlonger, respected research vice president at Gartner, failed to confirm that Vast is the only bank marketing cryptocurrency services to consumers, but notes that the increasing adoption of cryptocurrencies by Mastercard and JP Morgan suggests that Vast’s bet is likely on the mark.
Always one step ahead of the currency curve
Crypto and other digital tokens have a way of de facto becoming accepted as legal tender, and this limits what financial institutions can do. In the meantime, however, vendors can work with intermediaries like Coinbase, says Furlonger, who is optimistic that digital assets like cryptocurrencies and tokens will eventually be recognized as FIAT foreign currency in the US, as in other countries.
“In order for financial institutions to play a bigger role in the cryptocurrency ecosystem, there needs to be more transparency about how things like [identity verification] is done, how taxes are handled and reported, how the bookkeeping is done, and what state and federal laws apply, and I don’t see that in place right now, ”Furlonger said, adding. However, he expects this infrastructure to evolve over the next few years.
Vast’s partnership and integration with cryptocurrency provider Coinbase enables its customers to access the Coinbase trading desk through their Vast accounts to buy and sell cryptocurrencies. While crypto accounts are not supported by the FDIC, Coinbase offers private insurance for cryptocurrencies when they are deposited in their vaults.
The United States has tacitly pledged future support for cryptocurrency but does not want to undermine the US dollar. Therefore, competing US banking cores such as Oracle Flexcube, Fiserv, FIS and Jack Henry Banking are ready to support cryptocurrencies and hooks for artificial intelligence if – and if – the Fed gives the go-ahead for digital currencies.
So the IT department’s jump to the German SAP platform was a crucial first step in gaining an advantage in this emerging market. Convincing senior management to support the move to set up a platform on which Vast could offer Bitcoin and Etherium wasn’t too difficult, Taylor says. The intense competition that traditional banks like Vast face, both from internet-based fintechs like Chime and from national banks like Bank of America, calls for a jump-start in disruption.
“It was in line with using technology to really get competitive products out there quickly,” said Taylor, who previously worked in the oil and gas industry – a cornerstone of Oklahoma’s commercial sector. “Showing how cryptocurrency made this vision possible was a pretty natural and easy sale.”
The retail product is currently available to retail customers in all states, and Vast is developing a commercial product that should be out “very soon,” Taylor says a few, if any, other local banks are at this point.
And that’s thanks to the ongoing efforts of IT. “When we started the project in the direction of cryptocurrency, we set up an R&D project around the support of SAP for multiple currencies and expanded it for Bitcoin and Ethereum and all cryptocurrencies, which enables us to have native accounts directly in our banking core to create assets that can perform management for cryptocurrencies, ”says Taylor.
The result is a near-seamless integration between a customer’s cryptocurrency holdings and their banking services at Vast, he adds. “If I have a bunch of crypto, I can go to the gas station, sell my crypto, and then immediately use it to buy gasoline or have it on a debit card.”