Mastercard’s Crypto Arm Targets FIs Offering Customer Trading

Mastercard entered the market earlier this month to help financial institutions provide white-label cryptocurrency trading and custody services to retail consumers. It did so for one very clear reason: Customers wanted it.

According to a recent survey conducted by the industry leader in card payments, 60% of customers would be interested in their bank offering cryptocurrency services, according to Raj Dhamodharan, executive vice president of blockchain and digital asset partnerships and digital partnerships at Mastercard.

“Crypto is entering a maturity cycle where more and more consumers are interested in investing in it as an asset class,” said Dhamodharan, introducing that many want to get those services through all the financial institution they do business with every day.

He said that the same thing had also occurred in the realm of stock trading and investment. Before many financial institutions started to include stock trading in their array of financial services, only a few private enterprises provided trading.

According to him, Mastercard anticipates the same outcome with cryptocurrency investment.

Broad Demand:

For this reason, Mastercard introduced Crypto Source on October 17. This new service enables financial institutions to provide consumers the option to purchase, hold, and trade cryptocurrencies directly via the banks’ own applications and websites.

This includes a full range of products for trading, asset custody, and security management, including tools for cybersecurity and biometric identity verification as well as know-your-customer (KYC) and anti-money-laundering (AML) compliance, transaction monitoring, and analytics (Mastercard acquired the crypto analytics company CipherTrace last year). Additionally, it provides crypto-to-fiat currency off-ramping services and crypto spend debit cards with the Mastercard brand that can be used at 90 million retailers.

Finally, Crypto Source offers programme management services, including services for marketing and consumer education, as well as programme design and technology execution.

According to Dhamodharan, “We believed it makes sense for us to combine all of that into one service for financial institutions to utilise to provide launch, buy, sell, and hold services to their customers.”

“We’ve seen demand from around the world on this topic,” he said. “We think we can help bring a comprehensive service.”

According to Dhamodharan, the banks his division has spoken to are either wanting to add it as a tab to their website or app, but others are aiming to create a whole different brand for cryptocurrency services.

Three Issues:

Three primary areas of concern exist among the banks and financial institutions Mastercard has been collaborating with, according to Dhamodharan.

First, “they’re worried about what consumers are buying and selling — the range of assets that are offered,” he said.

Next is “making sure that people understand what they’re getting into, from the education perspective” he added.

They want to know how assets are secured, which is the third and maybe most crucial factor. The custodial tech is crucial, according to Dhamodharan.

That is why Mastercard decided to collaborate with Paxos when creating Crypto Source, he said, citing the company’s extensive knowledge and its prior work with Paxos on crypto debit cards and stablecoins. The Pax Currency (USDP) stablecoin is produced by Paxos, and its dollar peg is backed 1:1 by dollars and short-term US Treasury bonds.

According to Dhamodharan, “We think they can help bring the technology and expertise to do that custody.”

The Final Package:

Dhamodharan noted that Mastercard focuses on a number of other areas. One significant one is KYC/AML services, he noted, noting that while many of these users will come from current banking clients who have already undergone identity verification processes when opening accounts, those institutions obviously hope and expect to attract new customers through crypto services to whom they can cross-sell traditional banking services.

Another is the data analytics and data-related services it can provide, which are made possible by the CipherTrace purchase, which also added significant experience in crypto security, tracking malicious actors, and monitoring crypto transactions. Next, make sure that all countries where the institution could operate have regulatory compliance in place.

Dhamodharan said that assembling a collection of cryptocurrencies to provide would be a part of it given the hundreds of cryptocurrencies that exist.

“We have a crypto-specific consulting practise in our services group that will be available to help implement” these programmes, as well as “a full set of educational material available that can be packaged in with the consumer experience that they deliver” — something a key concern for many institutions, he said.

“We look at this is like, one thing by itself is not really going to solve” all of a bank’s needs when it comes to offering crypto services to customers, Dhamodharan said.

“It is the package of things that you need to enable the service,” he said, adding, “we think, and consumers think, and other partners think that this as an asset class is here to stay.”