All things change and the recent regulatory climate governing the retail brokerage industry is no exception. With multiple game changing verdicts coming into force, brokers have now been forced to adapt to a new world. This also includes the payments processing space, which has had no shortage of challenges or pain points to grapple as well.
As a payment services provider (PSP), Fibonatix is strategically placed in the industry to assess the recent regulatory changes. Finance Magnates interviewed Tal Miller, the CEO of Fibonatix, for his in-depth perspective on the payments industry and impact of cryptocurrencies.
How does the current trend of regulation affect payments processing for brokers?
As a payment services provider active in a variety of industries, I can say that the current trend of regulation is not at all different than similar trends in other industries. Regulators are constantly reacting to real or perceived threats to consumers in their countries as well as to political pressures both internal and external.
What unfortunately distinguishes many of the brokers in the online trading industry from similar operators in other industries (e.g. gambling) is the extent they employ the “ostrich approach” and refuse to face reality and deal with the changes.
Things change, it’s a fact of life. Rules change frequently due to a variety of reasons, and smart brokers need to:
- Adopt a mentality that accepts this
- Attach themselves to advisers (e.g legal, financial, etc.) that understand the changes and act in their clients’ best interests. Anything else is just burying your head in the sand and ignoring the inevitable
What challenges or opportunities lie for financial services firms in accepting payments and deposits in cryptocurrency?
Cryptocurrencies have a couple of distinct advantages to online trading companies:
- As a payment method, they are not subject to chargeback risk, the approval ratio is virtually 100 percent, and finally they can be cheaper than traditional payment methods
- They are the “sexy” new thing on the market and online trading companies can capitalize on the overall hype around cryptocurrencies to generate more deposits and/or sales
However, before anyone goes out and closes their merchant account, there are also serious challenges to consider. Exchange rate volatility is a serious threat that is often mitigated by exchanging to fiat at the moment of transaction. This increases costs and brings another issue.
Most crypto-exchanges cannot support high volume merchants with instant exchange to fiat, volumes above 500K EUR a day can become very challenging and conversion restrictions can be applied at peak times on even significantly smaller amounts which leads back to the abovementioned first challenge.
Finally, this includes card schemes (Visa, Mastercard, etc.) as well as most regulators via cryptocurrencies as a mechanism for circumventing regulation. Some of the regulators have even went as far as claiming that this is a mechanism of not just circumventing regulation but of facilitating in money laundering.
This can mean that unsupervised/uneducated use of this tool can quickly become a criminal offense at worst, or at best simply bring to closure of merchant and bank accounts.
Do you work with ICOs?
At Fibonatix, we selectively work with ICOs. Similar to other forms of crowdfunding, it’s important to sort out the “real” operations from those that sell dreams that cannot be delivered.
What is the approach of the traditional payments eco-system (1st and 2nd tier banks, PSPs, etc.) to ICOs and token economy?
In general, this is seen as a standard crowdfunding operation and treated similarly as described above.
How can tailored payment improve the performance or operations of brokers?
The reality of one-size-fits-all solutions is that they actually “fit” a very few if any at all. Every business is unique, every business case is different. Even if the problems are the same or similar their application can vary significantly between brokers.
Maximizing revenues while at the same time keeping the flow of funds stable by managing the processing risks can only be achieved by an approach that takes all the requirements and demands of the business to mind and is flexible enough to accommodate them.
What pain points do your clients face in payments processing, and how do you advise them to solve them?
The major pain points are pretty much the same across all industries:
- How can we maximize conversion and payment approval ratios by offering a variety of local as well as tier 1 solutions?
- How can we minimize fraud and chargeback levels without reducing sales?
- How can we ensure we’re always kept compliant in a dynamic and constantly changing regulatory environment?
The best way to address these pain points is by working with a provider that has a holistic approach that sees the business as a complete unit that encompasses sales, customer support, compliance, marketing and technology and doesn’t just focus on the “payment” aspect of this.
We always say this that at Fibonatix we don’t provide “merchant accounts” or “processing services”, instead, we provide payment-related SOLUTIONS and this is what you expect from your payment partners.