Five Ways Banks Mitigate Reputational Risk of Onboarding Crypto

Unless you’ve been living under a rock, you’ve undoubtedly heard of blockchain and cryptocurrencies. The advent of digital wallets is paving the road for easier and more rapid payment methods, altering how we do business. Payment processors instantly translate Bitcoin into local currency for merchants. Taking this method of payment may be relatively simple. Despite this, the majority of people and businesses have yet to sign up.

Although financial institutions that engage in cryptocurrency-related operations may attract new customers, present clientele may be concerned by the deviation from traditional services. Plummeting cryptocurrency values, scams, fraud, or any reputational damage might lead to a loss of trust in the crypto business. 

In banking and financial services, reputation and trust are tantamount to revenue. Crypto poses a substantial reputational risk that can be managed with the right strategy and tools.

According to Fitch Ratings, banks that invest more heavily in cryptocurrencies may face increasing reputational as well as other types of risks over time. However, the credit rating agency stated that it was doubtful that these banks’ expanding use of bitcoin financial services will have a significant impact on their credit ratings in the foreseeable future.

Many believe that crypto isn’t a legitimate investment. Today’s consumers significantly rely on internet evaluations to make selections about a variety of smaller and larger purchases, including where to obtain healthcare, who offers the greatest vehicle service coverage and also which banks to trust. 

Five Ways To Mitigate Reputational Risks

Build a robust crypto onboarding strategy. Understanding crypto, training staff, and learning how to most effectively use current skills or what consumer categories to focus on is essential to the success of crypto adoption and earning customer loyalty.

Financial institutions (FIs) can evaluate the effectiveness of their strategy by assessing its fit with current client bases and putting the validity of hypotheses to the test through expert interviews and data-driven scenario assessments.

Comply with crypto regulations. In most countries, government organizations have implemented a plethora of industry laws, regulations, policies, and best practices in an effort to slow down the crypto sector’s explosive expansion. Banks may face severe financial and legal repercussions for failing to comply with these rules, endangering their objectives and magnifying reputational risks.

Protect your customers’ digital assets. Among other types of financial crimes, money laundering, sanctions, sponsorship of terrorism, fraud, and scams pose a threat to the assets of the bank and the clients. Using reputable forensic tools and risk scoring software like QLUE™ & BitRank Verified^® the institution can further reinforce its crypto onboarding strategy and mitigate associated risks. Blockchain Intelligence Group’s forensic platform handles big data and facilitates the insight needed to make decisions through graphing and visualization.

Focus on the customer. Financial institutions must adopt effective customer experience management and utilize a variety of customer-focused techniques to minimize and mitigate banking reputation risk. Reduced reputational risk for banks is mostly achieved via increased client acquisition and retention initiatives.

Banks can accurately analyze customer experience by attentively examining feedback, which may lead to the insight-based actions required to boost customer happiness and overall brand reputation. 

Win customer support. By showcasing the benefits of onboarding crypto, banks earn enough credibility to maintain the trust of their customers. It’s well established that Bitcoin and other cryptocurrency transactions knock out those of fiat due to multiple advantages.

• Better and cheaper transactions
• Diversification
• Resistance to counterfeiting
• Low deposit fees

It’s not necessary for reputational risk management in banks to be a difficult aspect of running a financial firm. Thanks to satisfied clients and interested customers seeking a bank that fits their demands and streamlines the whole process, banks may uphold and even improve their reputation by concentrating on customer expectations and feedback.

Find out how Blockchain Intelligence Group’s blockchain analytics platform upscales your risk mitigation strategy