- Key insights: Some of the country's largest financial institutions are rolling out stablecoins, and with the right strategy, community and mid-tier banks can also reap the benefits of the new payment rail, too.
- What's at stake: Community and mid-tier banks first need to decide what the best use case is for their stablecoin before thinking about how to launch one.
- Forward look: Bank of North Dakota's stablecoin, the Roughrider Coin, is slated to launch later this year.
NEW YORK — Bank of North Dakota's stablecoin got its start in a diner.
"It was really one of those threshold moments that caused us to have this epiphany, given our business model," Geloff said. Bank of North Dakota is the only state-owned bank in the country, according to the bank.
Bank of North Dakota partnered with Fiserv to
For other community and mid-tier banks, the Roughrider Coin is a case study in how smaller financial institutions can take advantage of stablecoins' benefits even when they lack the resources to develop their own.
"My expectations are, we get adoption from our institutions in North Dakota to actually move money between each other. Banks do a lot of that movement between each other," Geloff said, noting that the bank moves between $400 and $500 million on ACH between banks per day.
"One of the things that I always like to explain to our banks is, right now, with a loan payoff, they either do an ACH or a wire — or most of them still cut a cashier's check. Those cashier's checks are then run across the street into the other bank teller line so that they can pay off the loan," he said. "If we can do that all with a stablecoin at 4:30 p.m. because our cut-off time is four o'clock or 3:30 p.m. or even two o'clock in some cases, why [shouldn't] we?"
But before community banks dive into stablecoin development, it is critical that they first decide what use cases are best fit for the technology.
"For us, that was the biggest question," Geloff said. "Those threshold moments that I talked about, they didn't really come into fruition until we decided how we were actually going to use it."
Bank of North Dakota settled on bank-to-bank payments for its stablecoin use case, but other community banks have been considering use cases like cross-border payments, Fiserv's Sachdev said at the conference.
For example, stablecoins can cut unit costs on cross-border transactions in half, Sachdev said. "This specific bank did 50,000-plus in cross-border [wire] transactions. Their unit cost was somewhere between $7 and $10 per wire. If you do that off of a stablecoin rail, based on our current thinking in math, it's anywhere between $2 and $3.
"That's a significant savings from a unit cost perspective that then allows you to reinvest that money to customer relationships, to be able to run a campaign or do other things, provide rewards incentives to your customers, to keep them tied and engaged with the financial institution," Sachdev said.
Geloff encourages other community banks to stop thinking about stablecoins as a mechanism of exchange and instead think of the technology as a payment rail.
"That differentiation becomes huge, especially in the banking world, because we are already used to payment rail systems with ACH and RTP and FedNow and wires," Geloff said. "If we switch our thinking to, 'How can an instantaneous payment rail system really help those customers?' You start to think a little bit differently with your use cases. That's why Venmo exists. That's why PayPal exists. And now we're trying to do those same things."
