As crypto pushes further into the mainstream than ever before, it’s still viewed by many traditional banks, financial institutions and payment service providers (PSPs) as too high-risk (due to factors like volatility and security).
Despite the resistance from some industry players, Finextra predicts that digital currencies are the next step in society’s financial evolution. These consist of a mixture of central bank-issued sovereign state digital currencies, along with decentralised open-source stores of value, and centralised private company currencies.
To be a part of the inevitable industry evolution, crypto exchanges require a payment strategy that facilitates easy trading and aligns with emerging financial technology, risk assessments, security standards, regulatory parameters, and wider organizational growth strategies.
As digital currencies are continually optimized for flexibility, pace and cost/fee reductions, there are growth opportunities for forward-thinking PSPs and crypto exchanges alike.
So, where do the crypto-friendly opportunities lie?
IBAN Payment Accounts
Many traditional banks don’t accept crypto exchanges as clients due to their high-risk status and due to the vast compliance related work required to have crypto exchanges as part of their services. The latter include enhanced customer due diligence, significant on-going monitoring, and the need to clearly understand both national and global regulations.
Connecting a crypto asset exchange to a preferred payment option requires having a bank account. A bank account is also required to pay employees and service providers. Since many banks won’t cater to the banking needs of crypto exchanges, getting an IBAN account with an Electronic Money Institution (EMI) is a viable alternative solution.
IBAN accounts have played a vital role in the increasing popularity of online banking and payment services by enabling secure, easy-to-manage, efficient and quick cross-border payments. First created to enable payments between banks across the Eurozone, the now global standardized codes help deliver security and streamline the transfer of funds worldwide. With IBAN, payment orders can be verified to determine the accuracy and validity of bank account information before funds are transferred.
There are also available more complex solutions like Virtual IBANs that can be used in different ways, for example to segregate customer funds to help with reconciliation and money management. Virtual IBANs can be used to allow VIP clients to have their own personal IBANs creating new opportunities such as the possibilities of having a debit card connected to the users’ exchange account.
While IBAN accounts hold particular promise for crypto exchanges, not all EMIs work with crypto exchanges — so finding one that does is key.
FinXP is a crypto-friendly, licensed European fintech company. We deliver a trusted, efficient and well-priced cross-border banking solution via our Euro IBAN Accounts. Learn more here.
Crypto Exchange Deposits
Offering the most widely used payment methods is attractive to new crypto exchange customers. Having multiple payment methods available to deposit funds can translate into more transactions and a bigger turnover. As in other online industries, the first deposit is the most significant as it helps establish the initial trust between the user and the exchange. It’s critical to accommodate the user’s needs at the earliest opportunity.
Another feature that can help users establish trust quickly are real-time payments. This is a big deal for some users who appreciate being able to access their funds immediately after they have deposited them with the exchange. Real-time deposits are vital to improving the user experience because they keep the customer engaged, they improve competitiveness, and certain real-time payment methods are actually more cost-effective than their slower alternatives. There are many ways real-time payments can be implemented. It’s always best to see which real-time payment method is best to implement for your customer base.
Learn how FinXP supports crypto trading platform, BitBlinx, by using innovative payment technology to streamline digital asset trading securely, transparently, and in a scalable manner.
Crypto Exchange Withdrawals
When choosing an EMI to process payments, it’s important to choose a service provider who can help you offer your customers the option of carrying out both crypto and fiat withdrawals. This can be a strong competitive advantage for your exchange. Keep in mind that not all banks and EMIs accept transfers from crypto exchanges.
After completing a full KYC procedure, harnessing real-time crypto-to-fiat withdrawals is entirely possible with an EMI like FinXP.
Gaining a Competitive Advantage with a Crypto Exchange Payments Strategy
Payment processing in the crypto exchange space isn’t easy to navigate alone, and most traditional financial institutions are likely to snub the opportunity to work with your crypto exchange altogether. Yet, in 2021, interest in crypto is rising tremendously, as are crypto transaction volumes. Therefore, accepting fast and convenient payments for crypto assets is a vital step for crypto exchanges to gain new customers and increase revenues.
To enhance your crypto exchange payments strategy, to differentiate your organization from competitors, and to gain a strategic advantage in the market, you will probably need to tap into the experience of payment and banking experts who already work with several players in the crypto industry.
At FinXP, we deliver a winning combination of unmatched industry expertise, long-term experience, an open mind towards innovation, and personalised consultancy to support growing crypto asset exchanges in Europe.
We’re Empowering Businesses with Seamless Payment Experiences
In a world where countless businesses are dissatisfied with the service they’re getting from traditional banks, FinXP is here as a practical, trustworthy alternative.
We enable businesses to make and receive payments in whatever form best suits them.
Contact the award-winning FinXP team on email@example.com to discover how payments and banking can help grow your crypto exchange.