Mastercard’s Crypto Arm Targets FIs Seeking Customer Trading Offerings

Mastercard moved into the business of providing the backend tools and support to let financial institutions offer retail customers white-label cryptocurrency trading and custody services earlier this month, it did so for a very simple reason: Consumers want it.

In a recent survey, the card payments giant found that 60% of consumers were interested in seeing their bank offer crypto services, Raj Dhamodharan, Mastercard’s executive vice president of blockchain and digital asset partnerships and digital partnerships told PYMNTS’ Karen Webster.

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

“This is the same thing that happened in the stock trading and investing world as well,” he said. “There used to be individual companies that offered trading and then over time, every financial institution began offering stock trading as part of their financial services portfolio.”

Mastercard thinks the same thing will happen with crypto investing, he said.

Wide Demand

That’s why, on Oct. 17, Mastercard unveiled Crypto Source, a new service that lets financial institutions offer customers the ability to buy, hold and sell cryptocurrencies directly via the banks’ own apps and websites.

This includes a soup-to-nuts suite of products that includes trading, asset custody and security management ranging from know-your-customer (KYC) and anti-money-laundering (AML) compliance, transaction monitoring and analytics — Mastercard bought crypto analytics firm CipherTrace last year — to cybersecurity and biometric identity verification tools. It also offers crypto-to-fiat currency off-ramping service and Mastercard-branded crypto spend debit cards, usable at 90 million merchants.

Finally, Crypto Source can provide program management ranging from program design and technology implementation to marketing and customer education services.

“We thought it makes sense for us to put all of that together into one service for financial institutions to use to offer launch, buy, sell, hold services to their consumers,” Dhamodharan told Webster.

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

The banks Dhamodharan’s division has been talking to are either looking to set it up as a tab on their website or app Dhamodharan said, although some are looking to build a whole separate brand for crypto services.

Three Concerns

The banks and financial institutions Mastercard has been working with have three main areas of concern, Dhamodharan said.

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.

“Thirdly, and probably the most important one, is that they want to understand how assets are secure. The custody tech is important,” Dhamodharan said.

That’s why Mastercard chose to partner with Paxos when building Crypto Source, he said, pointing to the digital asset trading and custody firm’s long experience and its previous experience working with Paxos on crypto debit cards and stablecoins. Paxos issues the Pax Dollar (USDP) stablecoin, with its dollar-peg backed one-to-one with dollars and short-term U.S. Treasuries.

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

The Whole Package

There are several other areas Mastercard focuses on Dhamodharan added. One big one is KYC/AML services, he said, noting that while many users of these services will come from existing banking customers who have already gone through identity verification procedures 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 offer, aided by the CipherTrace acquisition, which also brought substantial expertise in crypto security, tracing bad actors and following crypto transactions. Then there’s ensuring regulatory compliance is in place in all jurisdictions where the institution might operate.

Given how many thousands of cryptocurrencies there are, Dhamodharan said that curating a package of cryptocurrencies to offer will be part of it.

“We have a crypto-specific consulting practice in our services group that will be available to help implement” these programs, 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.”