Bitcoin Inches Closer to Mainstream with USAA/Coinbase Partnership

Financial institutions have been traditionally been more interested in bitcoin's underlying technology than in the virtual currency, but the maturation of cryptocurrency has led USAA to partner with a bitcoin wallet provider to serve the institution's mobile customer base.

The San Antonio-based financial institution has integrated Coinbase's application program interface, which lets customers monitor their Coinbase wallet balances when they log into their bank accounts.

"Our highly mobile member base is looking at new innovations," said Darrius Jones, assistant vice president of enterprise innovation for USAA, in an interview on Wednesday. "Our military members move quite a bit compared to other consumers. What better than being able to look at your various household account balances in a single place?"

Prevailing wisdom has written off cryptocurrency as toxic for regulated institutions. The tide, however, seems to have changed a bit recently for bitcoin, as several financial companies have announced bitcoin investments and other partnerships. The USAA-Coinbase announcement also comes amid a rally in the price of bitcoin, which has surged 48% since Oct. 4 to $465, after lolling around $200 for most of this year.

"There have been a lot of banks interested publicly in blockchain technology but it's not clear what they mean by that," said Nick Tomaino, business development manager at Coinbase. "Most are talking about private blockchains versus bitcoin technology and none have shipped anything. This is a bank actually talking about bitcoin and is shipping something."

Jones said he sees that bundling of nonbank financial services into the digital banking platforms as a differentiator between USAA, other banking institutions and their customers.

It is then perhaps unsurprising that USAA is the institution to bring bitcoin into the fold of its retail products. USAA has traditionally been proactive to embrace new innovation to serve its distinct customer base.

Integrating a way to view cryptocurrency balances is a "logical evolution in digital transactions," said Ghela Boskovich, director of global business development for banking software company Zafin. "Cryptocurrency is becoming better understood and we are no longer as married to fiat currencies," Boskovich said. "USAA is recognizing that there is a demand there. It is still a limited interest, but they've recognized it and are taking a practical business step to catch the first part of the wave."

For now, members can only view their bitcoin balance on USAA's channels. Whether USAA will allow its customers to exchange currency or transact in bitcoin will depend on the results of the pilot, which began on Monday and will run for about 90 days.

"You can imagine some other things they might be able to do on USAA.com," Tomaino said.

USAA participated in Coinbase's $75 million funding round early this year and has since been in talks with the USAA corporate development and innovation teams. Neither Coinbase nor USAA could disclose the figures, but Tomaino said the overlap between their customers is "really high."

"We kind of scratched our heads together and thought: what makes the most sense for them to experiment with bitcoin?" Tomaino said.

In their research, the companies said that there was both qualitative and quantitative data that showed USAA members were interested in being able to monitor their bitcoin wallet through their primary USAA banking channels. Given their prowess in digital innovation, perhaps their customers have come to expect the institution to be an early adopter, too.

"We're focused on having that new technology they're more able to adapt or willing to try," Jones said.