We reached out to Banca Sella and Hype to ask: why?
It has now been several months since our article analyzing Bitcoin's entry into the world of commercial banking. In the piece, we talked about how the Italian challenger bank Hype made it possible for its customers to keep deposits in the most famous cryptocurrency through an e-wallet, designed by Conio, integrated into its app. Shortly after the publication, we contacted the banking group, Gruppo Sella, to which Hype belongs. They gave us the opportunity to virtually interview two of the people who took part in the project to tell us how it was born, how it has evolved, and what they want it to be in the future.
First of all, the presentation of our guests: Marco Coda, formerly Head of Blockchain & Cryptocurrency Lab, is now Banca Sella's Cryptocurrencies digital asset analyst & Innovation Investment specialist. Massimo Andrenacci joined Hype in 2017. He worked personally as Project manager on the development and integration of the wallet and is now Product Manager.
Massimo Andrenacci, Marco Coda,
Product Manager @ Hype Cryptocurrencies digital asset analyst &
Innovation Investment specialist @ Banca Sella
Let's start immediately with the first question, namely, how was the project to bring Bitcoin into the pockets (or rather, in the deposits) of its more than one million customers born. The response of our guests is twofold and, as we observed in the first article, can be traced back to two points of view.
First that of the bank, Marco takes a step back. He tells us how the banks' interest in DLT was not born recently, but that, instead, it has been discussed within the institutions for some time now. Despite the initial hesitation in front of cryptocurrencies, due to their structure and history and the difficulty of immediate understanding caused by the lack of technological skills, many banks then moved quickly by mobilizing huge investments to discover the different applications and opportunities offered by this new type of digital asset.
The second point of view is that of the clients. Massimo tells us how the idea of integrating a cryptocurrency wallet into the Hype app came from the customers themselves. In particular, they were asked what their desire was in terms of new services that the bank could offer them. Hype's first strategy is to offer the best customer experience possible and, already today, it offers services designed for daily use and accessible from smartphones. The possibility of having access to the exchange and being able to have deposits denominated in cryptocurrencies has turned out to be the desire expressed by many of Hype's customers. Arguably, the explanation for why is inherent in the demographic nature of the bank's clientele. About 45% of them are between 18 and 29 years old, a component of the demographic that grew by 102% in 2019 alone1. It is therefore likely that many of their digital natives may be interested in this new type of digital asset, just as banks are.
The second question we wanted to ask our guests is why they chose Conio. We won't go into much detail in this article because we plan to write a dedicated one soon. The startup, born in Milan and now also based in San Francisco, offers an electronic wallet for the purchase of Bitcoin integrated into a smartphone application, therefore easily accessible. Added to this is the ability to engage in transactions using traditional credit cards and top-level user experience. These are characteristics precious to Hype too, which made Conio a good fit for a partnership. Andrenacci tells us how it was essential for them to follow the spirit of Hype, which wants to offer banking services easily accessible to its customers. And so it was, as easily experienceable by launching their app which, in a few steps, guides the user in the activation of their e-wallet.
As we were approaching the end of our chat, we turned our gaze towards the future. Several times in the past, our associates have been involved in studying what the impact of DLT may be on the banking sector, but we had not yet had the opportunity to ask for the views of those who have been dealing with it for a long time. Coda tells us how, according to him, blockchain will not replace the banking system or the money minted by central banks. The reason lies in the intrinsic nature of the financial institutions themselves which, over time, have become trusted guarantors and intermediaries. The news, which certainly will not please Satoshi Nakamoto, offers us an interesting starting point: if blockchain and cryptocurrencies are not a threat to the banking system, can they be an opportunity? Coda, he continues, arguing that it will be for those banks ready to renew. On the other hand, to act as a trusted intermediary for transactions between individuals or companies and to offer credit or consultancy services, the denomination of deposits, whether in dollars, euros, or cryptocurrencies (except for the volatility, a question soon resolved using stable-coins). Moreover, the use of a technology that allows decentralizing different processes would have several benefits that are coveted by banks, such as low transaction costs and transparency.
This perspective also allows us to better understand the rationale for some of the latest industry events, such as the acquisition of Quorum. Based on the Ethereum blockchain, J.P.Morgan launched the enterprise-variant in 2016 and, since and before then, had been collaborating with Consensys to fully exploit its potential. In August, the news broke out of the acquisition by Consensys that it is going to integrate the Quorum protocols in its already leading codebase to provide an even broader range of blockchain-based products and services to businesses like digital assets functionalities and the document management streamlining compliance2.
In the conclusion of our call, we all agreed that the classical, stereotypical conception of the blockchain and cryptos as destroyers of the banking system is now outdated. It is now imperative to change the paradigm and look to DLTs and the new class of digital assets as an opportunity for renewal, innovation, and progress towards more transparent and inclusive finance.>