Imagine running a business that by any metric is a runaway success.
You’re onboarding thousands of new clients per month, you’ve got a 4.8 star-rating on the Apple App Store, and you’re processing millions of dollars in transactions every day. You have hundreds of employees across the world. You’ve just been featured in Forbes Magazine.
You could be a major crypto exchange, a hot new NFT platform, a popular trading app, or a disruptive DeFi product that’s changing the future of financial services.
Yet, despite all of this success, you have to go to bed every night wondering if you will wake up to being shut down by your bank.
Just like that.
No warnings. No meetings with your lawyers. It’s just over. With a few emails, your bank has changed its mind about your business and decided to cut your access to the fiat banking world. No payments in, no payments out. Your business is dead in the water.
This is the harsh reality that many legitimate crypto and blockchain technology businesses have to live with every single day. The uncertainty of not knowing if your bank will change its mind on a whim. The reality of not having a real banking partner who understands your business and can work with you long-term as the crypto industry develops.
And the worst part? Many of these crypto-native businesses have spent millions developing state-of-the-art KYC (Know Your Customer) and AML (Anti Money Laundering) systems that are more sophisticated and compliant than many of the AML/KYC systems used by the banks they are applying to!
The reality is, a majority of crypto businesses had had to fight hard to be accepted by traditional banks in the first place. They may have spent months educating their bank on their business model, demonstrating their strict regulatory compliance, and proving how they are completely legal in all the geographic regions they operate in.
And once they are accepted? These crypto businesses are often charged inflated transaction fee rates because they are categorized as a “high risk” business by their bank. It’s a struggle at every stage.
It’s the main reason so many crypto companies have flocked to crypto-friendly hubs like Switzerland, Singapore, Malta, and Dubai. They are not trying to dodge regulatory or financial compliance…quite the opposite! These crypto companies are desperately seeking a stable business environment, with clear rules of operation, and access to the banking services they need to survive.
We spoke with a blockchain legal expert based in Switzerland on the issue:
“Even though incorporating in Switzerland as a crypto company is easier than most of the world…many of our clients still struggle with getting business bank accounts, and partnering with a solid bank for the long-term. I’ve seen first hand the stress that crypto business owners go through daily…not knowing if their bank is truly by their side.” —Nicola Massela, Legal & Compliance Manager —STORM Partners.
Are traditional banks even cut out to service the disruptive decentralized finance industry?
Further to all of the challenges of getting accepted by a bank, and living with the uncertainty that your bank will not support you for the long term —crypto-native companies need completely different support and services from a bank.
Because in reality, these crypto-native companies still need to rely on a strong “bridge” for their users to on-ramp their money from traditional financial systems into crypto, and then off-ramp back when they want to pull their money into fiat. Because no matter how game-changing a DeFi product is, users still need to get their money in and out of that product easily. On-ramping and off-ramping is a core functionality of how any crypto business operates.
Traditional banks were just not set up for this level of integration, leaving crypto companies struggling with the friction created by the barriers their bank throws up along the way. This includes high fees, long delays in bank transfers and unfair currency conversions. All which directly affect the crypto companies user acquisition and retention.
Not to mention dealing with the huge volume of customer support emails related to payments…which have nothing to do with the crypto company or their product. They simply have to devote a massive amount of financial and human resources to deal with customer complaints with regard to issues related to their partner bank. And everyone’s bank is different, which makes it impossible to address users’ banking problems at scale.
The solution: Crypto-native banking and embedded finance
Picture a full-service banking & payments platform that you can simply embed in any decentralized financial product, crypto exchange, mobile app, or trading platform in order to provide everything a compliant banking service does, from a single API.
Anyone building disruptive products in the blockchain and crypto space can simply plug-and-play a fully-functional banking platform instead of fighting with traditional banks for acceptance and approval of their product. A full crypto-native bank and true partner by their side. A banking and payments provider who is crypto-first and serves up specific solutions for their users.
Enter companies like OpenPayd who have essentially productized a full banking and payments solution for blockchain and crypto-native businesses. A banking solution built from the ground up to support the blockchain and crypto industry.
We had the opportunity to interview Ozan Özerk, Founder of OpenPayd, on this emerging class of crypto-native banking and payments solutions.
“We saw the massive opportunity in the market to support these crypto-native companies across the entire decentralized finance ecosystem with the specific challenges they were facing with traditional banks.” — Ozan Özerk, Founder — OpenPayd.
Traditional banks were always the ones “in charge”, they alone decided how financial services were executed and on what terms. Ironically, the decentralized finance industry is taking aim at disrupting many of the services that traditional banks offer, but they still need access to banking services for their clients to on-ramp and off-ramp their money into the crypto ecosystem.
While it’s true some banks are evolving to meet the needs of the decentralized financial revolution. It’s clear that this industry needs to be supported by banking and payments that are created with crypto-native companies in mind.