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What does the involvement of legacy financial institutions mean for crypto?

  • Established financial players are starting to accept cryptocurrencies as a legitimate asset class.
  • Does such institutional involvement contradict the basic thesis of crypto?

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What does the involvement of legacy financial institutions mean for crypto?

Welcome back to Payments, our bi-weekly newsletter about all things payments — from blockchain to BNPL to B2B. It’s inspired by our payments coverage as well as the top stories from around the payments space. Subscribe here.

As crypto continues to boom, legacy financial institutions are taking note, with American brick-and-mortar banks increasingly looking to offer crypto custodial accounts. U.S. Bank, the fifth-largest retail bank in the country, is the latest to offer crypto custody services to fund managers. Other major banks including BNY Mellon, State Street and Northern Trust have similarly announced plans to custody digital assets.

The trend indicates that established players are starting to accept cryptocurrencies as a legitimate asset class. While this may be seen as an encouraging step towards widespread crypto adoption, it begs the question of whether such institutional involvement contradicts the basic thesis of cryptocurrencies – with banks acting as custodians, is crypto’s decentralization under threat?

Our top stories

First-ever bitcoin ETF BITO launches
For the first time, investors can invest in bitcoin via an ETF, without having to buy the cryptocurrency on a crypto exchange. The ETF is intended to give exposure to investors who don’t want to go through the hassle of buying bitcoin directly.

With traditional banks acting as custodians, is crypto’s decentralized nature under threat?
Over $200 billion worth of bitcoins have been lost so far. Do people need a better way to secure their digital assets? “Not your keys, not your coins,” say crypto traditionalists, arguing the space is meant to be free of banks, with a fundamental ‘one’s own bank’ philosophy.

Making digital currency interoperable for everyone
How might central banks, businesses, and consumers exchange value across blockchain networks, no matter the currency? Here’s Visa’s latest thinking on the challenge of cross-chain interoperability. (Sponsored)

How customer experience is driving the new era of payments, in four charts
Increasing demand for experience-led solutions rather than products is defining a new era in the payments industry. Customer behavior is changing, driving financial institutions towards offering new lifestyle-embedded payment methods.

Cybersource is bringing contactless payments to riders worldwide
88% of global public transit passengers expect contactless payment options to ride. Cybersource is helping transit systems reduce complexities and accelerate implementation timelines to adopt Tap-to-Ride options for passengers. (Sponsored)

Stripe and Klarna partner on BNPL as competition grows

Stripe and Klarna, two of the world’s biggest private fintech companies, are teaming up. Stripe has initiated a strategic partnership with Klarna to offer the Swedish firm’s BNPL payment option to its merchants.

Stripe, which helps businesses accept payments online, said the tie-up would make it easier for retailers to add Klarna as a payment option on their website. Klarna typically partners with stores directly to embed its checkout button. The move could give Klarna a much wider reach of customers.

Klarna makes money from deals with retailers, which pay the firm a small cut on each transaction processed through its platform. Stripe says early results show that merchants saw a 27% increase in sales on average after integrating with Klarna, while average order value climbed 41%.

Critics have accused BNPL providers of encouraging customers – particularly younger ones – to spend more than they can afford. In the U.K., the government has made proposals to regulate the nascent industry to protect consumers from potential harm.

Stripe’s deal with Klarna could be a way for the payments giant to capitalize on a fast-growing trend as rivals like Square and PayPal make big moves in the space. Square recently agreed to acquire Australia’s Afterpay for $29 billion, while PayPal has its own BNPL service and is buying Japanese rival Paidy for $2.7 billion.

Last valued at $95 billion, Stripe is the world’s largest privately held fintech. Klarna is the second-biggest globally, with a market value of nearly $46 billion. Both firms are expected to go public in the near future.

Read the full story on CNBC.

What we're reading

Visa invests in crypto credit card startup Deserve (Bloomberg)

Mastercard introduces accessible card design for visually impaired (WSJ)

Walmart adds bill payment service VanillaDirect to stores (PYMNTS)

PayPal not buying Pinterest "at this time" (PYMNTS)

Uber Freight teams up with Marqeta and Branch for faster payments (Business Wire)

Nium launches in the U.S. with Crypto-as-a-Service platform (Finextra)

What BNPL has in common with Visa and Mastercard’s early days (PYMNTS)

Citcon raises $30 million to make mobile wallet payments ‘as easy as paying with a credit card’ (TechCrunch)

Brex signs a term sheet for $300 million at a $12 billion valuation (TechCrunch)

Zelle teams with Fiserv on real-time payments for MDIs (PYMNTS)

Post-Visa, Plaid moves into A2A payments (Finextra)

Starbucks eyes cashierless stores with help from Amazon (PYMNTS)

Wise revenue jumped 25% in Q2 following a rise in customer numbers (Reuters)

Facebook pilots its digital currency wallet Novi, but without Diem (Finextra)

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