40 JANUARY / FEBRUARY 2023 The allure of investing early in the “next big thing” has led to increased interest in crypto investment. As a new industry, it is highly unregulated compared to other investments. While there is potential for a big win, there is strong potential for a big loss. Here’s what you need to know to protect your institution. Visible Risk: Which of Your Customers are Drawn to Crypto? Which of your customers are at risk for moving investment dollars away from your institution to crypto? Which of your customers have investments with crypto firms? If you do not know the answer to these questions, you would be wise to invest in a data analytics solution that identifies customers who are pulling money from your bank and investing it into cryptocurrency. While this level of technology is familiar in large banks, emerging data analytics products built specifically for mid-market institutions can provide such insights. Customer behaviors can be mined to provide on-demand customer intelligence. For example, you can ask using natural language “which of my customers have crypto investments” or “which of my customers are most likely to purchase crypto” and receive an answer in minutes that you can act on. Analytics for mid-market banks offer this level of insight to inform strategies and target customer segments with personalized campaigns. Visible Crypto Risk: Losing Investment Dollars Financial institutions are concerned with how to compete against crypto for investment dollars. For The Risks of Cryptocurrency Visible and invisible risks for mid-market banking institutions example, how do you introduce an attractive investment offer to compete with crypto options and keep your customers’ dollars in your bank? Perhaps your bank has a product that would be attractive to a crypto buyer. If so, having visibility into which customers to target and win over those investment dollars is valuable. Visible Crypto Risk: Fraud Cryptocurrency is particularly a risk because cybercriminals can quickly get money as a reward, as well as gain access to valuable account and other personal information that can be exploited. Furthermore, the lack of government regulation makes it easy for criminals to get in front of consumers and there is little recourse for them, due to lack of fraud protection. Exchange sites aim to minimize consumer risks, but crypto is still in the Wild West stage. Unscrupulous scammers have been attracted to this emerging industry, and many consumers have no idea which crypto brands are legitimate. Because cryptocurrency is digitally stored, it is vulnerable to theft. There is no financial intermediary in the event of fraud. Cryptocurrency is not backed by the government and, unlike credit card purchases, returns and refunds are often not possible because the unregulated industry does not offer these as standard protections. How Can You Protect Your Customers from Crypto Fraud? Knowing which customers are at risk for fraud presents a valuable insight you can act upon. Educate those customers and make them more aware of crypto risk, how to stop fraud, and hopefully prevent them from falling victim to scams. Taking proactive measures Katie Horvath Chief Marketing Officer Aunalytics Katie.Horvath @Aunalytics.com Aunalytics is an associate member of the Indiana Bankers Association. OPERATIONS / TECHNOLOGY
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