Vantage Bank takes a progressive stance on cryptocurrency. The San Antonio community bank recently participated in a secondary market municipal loan transfer recorded on a blockchain and CEO Jeff Sinnott, a former software engineer and chief information officer at Summit Bank, has explored partnerships with several crypto companies.
These dabblings in crypto got bank staff wanting in on the action.
“As we started getting more and more into that space, we started all of a sudden having employees ask if they could invest in cryptocurrencies as a retirement plan,” said Eric Thompson, chief human resources officer at the bank, which has just over $3 billion of assets.
Right about that time, NYDIG, a crypto custody and technology company in New York, reached out to him about the bitcoin savings plan it was developing, which invests a portion of each paycheck in the digital currency. Once signed up, employees adjust their direct deposit allocations to direct part of their post-tax paycheck to a bank account at NYDIG’s banking partner, MVB Bank in Fairmont, West Virginia, which has just under $3 billion of assets. NYDIG buys bitcoin with that money and stores it on the employee’s behalf; the hope is that the user will get a good return. NYDIG stands for New York Digital Investment Group, but the company is widely known as NYDIG.
Thompson was immediately convinced. “We were all on board,” he said. “It went in line with the feedback we were getting from our associates.” When NYDIG launched its bitcoin savings plan in April, Vantage Bank was one of the first companies to offer it.
Since then, the New York Yankees, the Houston Rockets, the software company Q2 and MVB Bank in West Virginia have also begun offering the bitcoin savings plan. These companies say they are providing something employees want and that the offering helps them attract talent. They are aware of the volatility of bitcoin, but believe they can minimize the risks by educating employees about the investment and capping the amount people can invest.
Thompson sees the bitcoin savings plan as a recruiting tool.
“Right now I’m sure you’re very aware that there’s a war for talent,” he said. “It is difficult. One candidate that we were looking at asked what all of our benefits were. I said we offer medical, dental, all of that. One of his comments was, well, these are the same things I can get from anybody. What else can you do for me? And that’s where we can now say, hey, we’ve got this bitcoin savings plan. This is something you’re not going to see at many other employers.”
The Yankees, who signed a multiyear partnership with NYDIG in July, had a similar motive.
“Our partnership with NYDIG to make bitcoin available to Yankees employees is about attracting and retaining the best talent across the industry,” said Aryn Sobo, vice president of human resources, employment and labor law for the baseball organization.
A recent survey conducted by NYDIG found that 36% of workers under the age of 30 would like to be paid in bitcoin.
“We believe there is significant demand out there for this, especially amongst under-30 employees who are more tech focused and spend a lot of their time, maybe even outside of work, focused on technology,” said Kelly Brewster, chief marketing officer at NYDIG.
At Vantage Bank, employees have been so enthusiastic about using the bitcoin savings plan, the bank has had to rein them in a little, Thompson said.
“Some associates were asking, can I get paid in bitcoin?” Thompson recalled. “We wanted to be very clear that this was not a, you’re getting paid in bitcoin, but this is a bitcoin savings program.”
It also had to ask employees not to put 100% of their paychecks into the program, and eventually capped the amount employees can invest in it to 10% of each paycheck.
“We wanted to save them from themselves,” Thompson said.
All told, close to 20% of the bank’s 450 employees have signed up, which Thompson considers a good adoption rate.
What about the risk?
There is always the chance that the price of bitcoin could fall precipitously or even get to zero.
“I would only be investing in cryptocurrency at this point in time if it was money that you could afford to lose,” the personal finance expert Suze Orman said in a recent interview with American Banker. “If it was money, in fact, that you wouldn’t need for a seriously long period of time, because we never know when the government might step in and regulate it.”
Someone might invest when bitcoin is worth $60,000 and watch its value drop to $13,000, she said.
“As soon as people see their savings start to fluctuate, in my opinion, they’re going to stop saving,” Orman said. “They’re going to get afraid. Because the goal of money is for you to be secure. And when you see your savings account go from $400 down to a hundred dollars, in your head, you’ve lost money. You never want to feel like you’ve lost money when it comes to savings.”
At Vantage Bank, “It is something that we do think about,” Thompson said. The bank runs a financial literacy program with Merrill Lynch to help employees understand the risks and what else they could do to save.
Most people that are using Vantage’s bitcoin savings plan are putting small amounts in it, he said.
“Some of them are using it as a test to get into bitcoin, because of the fact that there are no transaction fees,” Thompson said. Others that were using an exchange like Coinbase to buy cryptocurrency and paying fees have switched to the bitcoin savings plan because it charges no fees, he said.
“Most of the people in the program have already been experiencing or using bitcoin somewhere else,” he said.
The bank puts disclosures about the risks of investing in cryptocurrency on its intranet and talks about this during new-hire orientation.
NYDIG sees investing a portion of each paycheck in bitcoin as relatively safe.
“With something that can be volatile at times like bitcoin, dollar-cost averaging, buying a little bit periodically over time at set intervals, can dramatically reduce the volatility that you experience,” Brewster said. “It smooths out the bumps along the way. You’re not making a decision that now is a good time to buy, now is a good time to sell. This program is also not about day trading. This really is about savings and getting employees to make sure they’re looking at this with the right time horizon, that they’re thinking about this as something that they’re putting away for years, not necessarily months or weeks.”
In the future, NYDIG may add employee rewards to the bitcoin savings plan.
“We’ve heard from a lot of employers across many different industries, especially in retail and hospitality, that they love the idea of being able to give an employee a performance reward or a reward for attendance, and to be able to do that in bitcoin,” Brewster said. “That is a very exciting thing that we’re working on right now.”