Fast, cheap and secure: 3 advantages of crypto processing for high-risk businesses in 2021
In December 2020 and early January 2021, the card processing market for high-risk became virtually “frozen”. This happened due to several negative events initiated by the Central Bank and VISA. The end of 2020 was especially unpleasant for Forex brokers, existing payment aggregators and several banks.
In early December, the Central Bank fined Qiwi-Bank 11 million rubles and limited some of its operations. Then there were careful test purchases by VISA, as a result of which, RFI Bank also received a fine. In addition, one of the main banking partners of the payment aggregators, FinTech and Onego Banks, lost their licenses. It was these financial organizations that provided processing through most of the payment systems in Russia.
Now the partners are looking for ways out of the crisis by bypassing the current market situation and are looking for new banks that are ready to provide card processing for Forex brokers. But until the exit paths are found, it is worth paying attention to crypto processing, which has its own advantages over the traditional banking one.
The first advantage of crypto processing is the cryptocurrency fees are lower
Usually, for unlicensed brokers, the fee for transfers in cryptocurrency is only 4-6%, but in payment aggregators via VISA and MasterCard it varies around 6-10%. The percentage of the bank fee is higher because it is influenced by a number of factors: the method of sending money, the chosen currency, the distance of a transfer (within the bank or to other financial institution), a transfer within one country or abroad and etc.
The second advantage is the speed of transfers
In the case of cryptocurrency, there are practically no delays; transactions are almost always instant. On the Bitcoin network, sending funds usually takes about 10 minutes, which is the slowest system. For example, transactions take place several times faster on the Ethereum and Litecoin blockchain. In the case of Ethereum Classic and XRP, transactions are carried out within a minute.
Transactions through VISA and MasterCard also go through almost instantly, but in the process, nuances may arise that affect the success of a transfer in the high-risk segment. Transactions are often canceled by a PSP due to suspicions of untrusted traffic or miscoding. Also, the reason for canceling the transfer may be a card issued in a certain country. Therefore, PSPs indicate the countries, cards from which cannot be used.
The third advantage is that there is no miscoding but there is stability of transactions
If everything is clear with traffic and non-working cards, then it is worth talking about miscoding in more detail. A bank can cancel or delay a transaction for verification if it considers it suspicious, that is, it suspects miscoding in it. Miscoding happens when is a four-digit number, demonstrating the type of activity of the company that receives the payment, is replaced. For example, if the transaction code assigned by the PSP is 7995 ("gambling"), then the bank must automatically block the transaction. But casinos without licenses use miscoding, using other codes for transactions, such as - 7994 ("video games").
Cryptocurrencies, on the other hand, do not have a governing body, so no one can suspend, cancel, block or somehow influence a transaction.
However, cryptocurrency also has a disadvantage - the process of convertibility
The exchange chain for any coin is as follows: the user needs to buy bitcoin or another cryptocurrency, send it to the addressee or to another account and then change it back to fiat. Therefore, converting cryptocurrencies to dollars, rubles and other traditional currencies is not always profitable and convenient.
However, this disadvantage is partially compensated by card processing.
In order not to slow down the work of high-risk merchants in the crisis situation, the payment aggregators have found a solution to the issue by carrying out crypto processing via VISA and MasterCard. Now coins are automatically converted to fiat, and back from fiat to crypto for withdrawals.
In crypto processing solutions, miscoding is not used. In VISA and MasterCard, such transactions come with a code - "purchase of cryptocurrency", which does not require licensing.
For example, you buy cryptocurrency with your VISA card within a PSP itself. The PSP automatically selects the current rate based on which currency you are using and how much cryptocurrency you want to purchase through the built-in widget. The widget then automatically transfers the fiat crypto to the merchant account of the PSP. In other words, the convenience and simplicity of card processing are combined with the speed and safety of crypto processing.
According to a survey of four PSPs, this method will become the standard by the end of 2021, since no concessions from VISA and MasterCard are predicted and financial penalties related to Forex processing will increase.
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