In this era of constant change, the cutting edge can come from seemingly unlikely places.
Squeezed between megabanks and a rash of emerging fintechs, family-owned Vast Bank is seeking to stand out by becoming among if not the first US bank to offer cryptocurrency services directly to retail customers.
The move, which sees the Tulsa, Okla.-based nationwide chartered bank partnering with crypto exchange platform Coinbase to offer integrated cryptocurrency services, caps off a five-year digital transformation centered around SAP enterprise software.
The bank, founded 40 years ago as Valley Bank, is betting on a crypto-friendly financial future in the US. To capitalize, Vast shifted to an SAP banking core back-end system that supports multiple currencies, cryptocurrencies, and customization capabilities to extend support for other digital assets, says CIO Stephen Taylor.
“Over the last five years, we’ve been on a journey to completely re-digitize our technology platform based on a [banking] core that is used by many large money center banks in Europe,” Taylor tells CIO.com, noting that 70% of transactions at the Commonwealth Bank of Australia and Deutsche Bank in Germany, for example, run through SAP’s core banking platform.
“We were the first bank in the US to implement [SAP’s core banking] product so we localized it to the US, and built around it a bunch of technology components, including a series of APIs and open APIs used in open banking in Europe to get us ready for what we believe is the next trend in open banking,” Taylor says.
The result of this transformation has Taylor certain that Vast Bank is 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, distinguished research vice president at Gartner, could not verify that Vast is the only bank marketing cryptocurrency services to consumers, but he does note that increasing acceptance of cryptocurrency by the likes of Mastercard and JP Morgan indicates that Vast’s bet is likely on the mark.
Keeping ahead of the currency curve
Crypto and other digital tokens have a ways to go in gaining de facto acceptance as legally tendered currency, and this limits what financial institutions can do. But in the interim, vendors can partner with intermediaries such as Coinbase, says Furlonger, who is optimistic that digital assets such as cryptocurrencies and tokens will eventually garner approval as FIAT exchange currency in the US as it has in other nations.
“For financial institutions to play more of a role in the cryptocurrency ecosystem, there is going to have to be more transparency surrounding how things like [identity verification] is conducted, how tax will be treated and reported, how accounting will be undertaken, and what laws apply at a state level and at the federal level, and I don’t see that being in place right now,” Furlonger says, adding that he does, however, expect this infrastructure to evolve over the next several years.
Vast’s partnership and integration with cryptocurrency vendor Coinbase enables its customers to access the Coinbase trading desk through their Vast accounts to buy and sell cryptocurrency. While crypto accounts are not backed by the FDIC, Coinbase does offer private insurance for cryptocurrency when deposited in its vaults.
The United States has tacitly pledged future support for cryptocurrency but does not want to undermine the US dollar. As such, competing US-based banking cores such as Oracle Flexcube, Fiserv, FIS, and Jack Henry Banking are being readied to support cryptocurrency and artificial intelligence hooks when – and if — the feds greenlight digital currencies.
Vast IT’s jump to Germany-based SAP’s platform, then, was a crucial first step in getting an edge in this emerging market. Persuading upper management to back the move to establish a platform on which Vast could offer Bitcoin and Etherium wasn’t too difficult, Taylor says. Intense competition that traditional banks like Vast face from both internet-based fintechs such as Chime and national banks such as Bank of America necessitate getting a jumpstart on disruption.
“It was in alignment of leveraging technology to create really rapid competitive products in the market,” says Taylor, who formerly worked in the oil and gas industry — a staple of Oklahoma’s commercial sector. “Showing how cryptocurrency enabled that vision was a pretty natural and easy sell.”
The retail product is currently available to retail customers in all states, and Vast is developing a commercial product it hopes to “launch very soon,” Taylor says, adding that, although it’s still early days, Vast is technologically ready to accommodate digital assets in a way few if any other local banks are at this point.
And that is thanks to the sustained efforts of IT. “When we embarked on the project toward cryptocurrency, we stood up an R&D project around SAP’s support for multi-currencies and extended it for Bitcoin and Ethereum and all cryptocurrencies, which allows us to create native accounts directly in our banking core that can do asset management for cryptocurrencies,” Taylor says.
The result is 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 use it immediately to buy gas or have it on a debit card.”