Experts explain how Gen Z’s interest in crypto will affect the future of banking

Cryptocurrency, as far as Gen Z is concerned, has its place in the future of finance.

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GOBankingRates’ Best Banks 2023 survey found that more than a quarter of Gen Z respondents believe their bank is affiliated with a cryptocurrency exchange or platform is important.

While crypto has seen significant setbacks in 2022, the outlook seems to be brightening. Bitcoin briefly rose above $23,100 and is now up around 37% since early January. If more than a quarter of Gen Z sees the potential of crypto in banking, what does that mean for the future of finance?

Ability to recognize digital currencies

In the global survey sponsored by SAS Banking in 2035500 banking executives from around the world were asked about the trends that will shape the sector over the next decade.

The digitization of financial services and the adoption of emerging technologies are the main opportunities for the sector, cited by 55% of respondents. Closely following in second place – 49% of respondents – comes the emergence of digital currencies.

A digital revolution is underway. Moreover, the disruption is recognized as an opportunity even though the sentiment among bank executives is one of cautious optimism.

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The Next Crypto Iteration: A Hybrid of Web2 and Web3

What does this digital revolution look like within a banking institution? Marc Arbones, founder and publisher of Mastery of Altcoins, said the next crypto iteration will be a hybrid of Web2 (aka social media) and Web3 (blockchain, etc.). More institutions will accept and offer cryptocurrencies to customers.

This is good news for Millennials and Generation Z, as well as digital currencies that are becoming increasingly common as alternative investments. Arbones said traditional banking institutions and Web2 are slowly adopting cryptocurrencies.

“I see a combination of Web2 and Web3 emerging,” Arbones said. “It will take some time to transition to a fully decentralized banking system.”

Banks will have to integrate cryptocurrency into their services

The more Gen Z and Millennials diversify their retirement portfolios with cryptocurrency investments, the more it will become necessary for banks to pay attention. David Kemmerer, co-founder and CEO of CoinLedgersaid it would be important for banks to integrate crypto into their services.

“Gen Z is looking to incorporate crypto into their investment and retirement plans,” he said. “Millennials and Generation Z have started investing in cryptocurrencies outside of their traditional asset classes. Banks should find a way to support cryptocurrencies as a strategy to capture millions of Gen Z customers.”

Although most banks do not sell crypto directly, some have already started supporting customers who want to access digital currencies. Ally, USAA, and Chime are among the banks that serve as intermediaries for crypto exchanges.

Will banks succeed in offering digital currency?

In a word, yes. As banks become affiliated with crypto exchanges, Kemmerer said, more finances will be held in cryptocurrencies rather than cash. This type of affiliation is exactly what Gen Zers surveyed by GOBankingRates want to see as part of their banking experience.

What banks will need to focus on carefully, Kemmerer said, is their ability to strike a balance between protecting customer privacy and tackling illicit finance. The growth of crypto in banking could also be limited by regulatory concerns.

If banks can find that balance and navigate the hurdles, Kemmerer said they’ll likely find success. Banks will be able to offer digital currencies to their customers – an important offering for the growing number of Gen Zers who view crypto as an investment vehicle.

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