Why are crypto exchanges looking into open banking?

Owning crypto is no longer a quest for fringe investors and thrill-seekers. According to Statista, the global user base of cryptocurrencies increased by nearly 190% between 2018 and 2020, only to reach 221 million in June 2021.

While the numbers show a massive adoption rate, the truth of the matter is that for crypto to go mainstream, a few of the current challenges need to be addressed and ironed out.

Buying crypto becomes easier, safer & faster with open banking

Currently, to buy crypto on most exchanges, you need to make a card payment or a manual bank transfer. While users are familiar with both processes, the customer experience is outdated, clunky and lengthy enough to push people away. 

More specifically, card payments are prone to fraud, and there is a natural resistance and fear tied to inserting bank details into new websites. A card payment also takes time to settle. If that’s not enough, currency prices change by the second, meaning that buying crypto with a credit card is not the best option in terms of timing. 

On the other hand, while traditional bank transfers are more secure, the experience is really poor, and it’s not easy to scale from a business perspective. 

These payment solutions were designed for a hybrid world, where some actions happen in person and others happen digitally. Blockchain technology is exclusively digital, and so is open banking. The two are a match made in heaven.

Open banking will not only make the crypto buying experience faster, easier and more secure, but it will also decrease costs for businesses offering the service. 

A natively digital experience: buy crypto on the platform

How does a crypto buying experience work in an open banking environment? When a user lands on the platform intending to make a payment, they will briefly be redirected to their bank’s site at checkout and automatically brought back again to complete the transaction.

This automated process is not immediate, but it emits a sense of trust for the user as they are interacting with their bank, a provider they can rely on. 

Security

When it comes to security and ease of use, these are two concepts that have traditionally caused friction for most businesses. With open banking, you can hit two birds with one stone. With open banking, the user can confirm their identity via their bank’s app with their fingerprint or by face recognition, avoiding unnecessary, laborious and cumbersome steps. 

Timely settlement

With open banking payments, settlement is immediate. This means that the users can use their money straight away, not having to wait around. From the business side, the benefit is that exchanges no longer need to provide a pre-funding service, which significantly reduces their liquidity risk.