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NCR Corp., a publicly traded company, is introducing bitcoin services to its wide range of banking and credit union clients.
(C) 2018 Bloomberg Finance LP 650 banks in the United States will soon be allowed to sell bitcoin to an estimated 24 million clients. Community banks, such as North Carolina-based First Citizens Bank and credit unions, such as Bay Federal Credit Union in California, will be able to offer cryptocurrency trading to their clients through mobile applications built by the payments provider as part of the deal between enterprise payments giant NCR and NYDIG, the sister company of $11 billion Stone Ridge Asset Management. Instead of dealing with the burdensome regulatory issue of actually holding cryptocurrency for their customers, financial institutions that choose to offer the service will rely on NYDIG’s custody services, which will generate revenue through cryptocurrency transaction fees and additional investment services.
The move is the latest by Atlanta-based NCR to capitalize on demand from banks and credit unions fed up with crypto purchases being made from their accounts and sent to third-party exchanges. By allowing these customers to acquire bitcoin and later spend it within their existing accounts, these institutions are putting themselves in direct rivalry with cryptocurrency exchanges.
Douglas Brown, NCR’s head of digital banking, adds, “We’re ardent believers in the benefits of crypto and the strategic use.” “This is true for our banking connections, as proven by NYDIG, as well as for stores, restaurants, and other businesses.”
NCR, formerly known as the National Cash Register, employs 34,000 people in 160 countries and provides services ranging from digital banking to ATMs and restaurant point-of-sale kiosks. The company’s stock dropped 62 percent to $13.43 from January to March 2020. Then, following in the footsteps of Paypal and many other financial technology service providers since the Covid-19 outbreak drove many banks to close their physical offices, NCR’s shares has risen 238 percent since March 2020, when quarantine began, to $45.44. Last year, non-cryptocurrency transactions brought in $6.2 billion for NCR.
According to research company RBR, NCR is the largest provider of point of sale software to supermarket and other retail outlets in the world, with a 45 percent market share. NCR supports 180,000 restaurants, retail chains, and other businesses, including Fifth Group Restaurants in Georgia and Metropolitan at the 9 hotels in Ohio, which might all accept bitcoin payments in the future if all goes as planned.
The 135-year-old group teamed with New York-based crypto-payment business Flexa in May to allow customers of Sheetz, a convenience store chain located in Altoona, PA, to pay for petrol and other goods using bitcoin, ether, litecoin, dogecoin, and other cryptocurrencies. He claims that “dozens” of NCR’s banking and credit union clients have complained about their customers utilizing their savings to purchase bitcoin and other cryptocurrencies.
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Instead of losing those assets to third-party cryptocurrency exchanges—or sending threatening letters to their customers saying they don’t condone the purchases—they decided to seize the value by offering the services themselves. “That’s one of the reasons why banks are so ecstatic to have this capability for themselves and their customers.”
In the first phase of the relationship, NCR’s banking clients will be able to purchase, sell, and trade bitcoin and other cryptocurrencies directly from their mobile app. While the buyer will believe they are dealing directly with the bank when making these purchases, the actual assets will be held by NYDIG on the backend. When a consumer wants to buy bitcoin, it’s supplied from a number of licensed OTC desks and exchanges and sold with a small markup based on the amount of the trade and other considerations. The bank, in turn, pays NYDIG a monthly charge per user. “I believe you’ll see lower transaction fees through the banks than you see now in the marketplace,” says Patrick Sells, NYDIG’s head of bank solutions. “However, the banks have the authority to set the transaction fee.”
Brown believes that, in addition to being able to charge for investing advice, banks will likely follow PayPal’s lead. The rate at which users visited the app increased by 100 percent in the months following the payments giant began allowing them to buy and spend bitcoin, expanding the chance to sell them other things. “Banking today is a daily or a couple of times a day activity for many,” Brown explains. ‘Crypto reaches a degree of developing engagement that is hourly or sub-hourly.”
While the Office of the Comptroller of the Currency granted banks the right to hold private keys that provide customers access to bitcoin on behalf of their clients last year, NCR bank customers will not have to worry about that. According to NYDIG, it intends to keep the exact amount of assets purchased by its clients in an off-line, cold-wallet custody environment. “Every dollar of customer bitcoin is bitcoin held in custody, in trust for the customers,” Zhao explains.
Brown believes that in phase two of the implementation, NCR will finally be in charge of its own assets. It’s also looking into non-cryptocurrency uses of blockchain and other distributed ledger technology to aid in the execution of complex transactions involving several participants. Despite years of false starts by other retailers who made crypto payments available—only to see few people actually spend the assets—chief NCR’s technology officer Tim Vanderham is part of a second wave of executives helping nearly 200,000 restaurants and other retail clients accept cryptocurrency payments, according to Brown. Future efforts are planned to entail, among other things, making bitcoin purchases available through the ACR’s 800,000 ATMs.
“We have a bigger aim to do a variety of things with crypto,” Brown says, “which will extend into our multi-vertical marketplaces, retailers, and restaurants.” “After that, there are more capabilities centered on digital banking.”
New York Digital Investment Group (NYDIG) was created in 2016 as a mechanism for Stone Ridge and its workers to store bitcoin and other cryptocurrencies off-line. Shortly after its start, the company expanded to incorporate basic services like as trade execution, and by 2020, it was offering crypto-accounting, financing and derivatives assistance, as well as innovative ways to analyze trade data. The application programming interface (API) that allows third parties to build into the bitcoin tool stack didn’t go live until this year, resulting in a flood of new companies.
The company now employs 190 employees, up from 51 in January. It is not disclosing revenue figures.
NYDIG held $4 billion in crypto assets as of February 2021, including at least 30,000 bitcoins worth $1 billion that were owned by its parent business, Stone Ridge Holdings Group. Just a month later, the firm’s assets under control had surpassed $6 billion, and it has since discreetly amassed financial infrastructure relationships that it claims would allow it to provide bitcoin services to around 70% of US institutions.
According to a Cornerstone Advisors poll of 3,898 US customers conducted in December 2020, 60% of cryptocurrency owners would utilize their bank to invest in cryptocurrencies. However, just approximately 2% of banks were enthusiastic about the idea. That appears to have altered since then, with JPMorgan Chase & Co., Goldman Sachs, and Morgan Stanley all taking cautious moves toward adopting bitcoin.
While skeptics of the incredibly volatile cryptocurrency remain in full force—it reached an all-time high of $64,500 in April before plummeting 50% in days—NYDIG and its banking partners, FIS, Fiserve, Q2 Holdings, and Alkami Technology, today took out a full page ad in the Wall Street Journal in an attempt to bring bitcoin to a wider audience.
“Those five partners are the lifeblood of the global financial system,” Sells adds. So thinking about bitcoin, the asset, bitcoin, the rails, and what we can achieve together in conjunction and partnership is nothing but exciting.”
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