What is fiat wallet-as-a-service and how does it boost crypto adoption?

Embedded finance – the idea of banking payments or other financial services products into the user experience – has been one of fintech’s most exciting trends in recent years, and it’s easy to see why. Because the services are embedded into the user journey, the customer gets the financial product they need, at the right time, without having to leave the app they're using. It's simple, convenient, and, most importantly, a frictionless, effortless experience, which is critical to conversion for merchants.

Embedded finance has many forms, but one of the most effective is wallet-as-a-service which allows merchants to start offering their own branded wallets at the checkout, instead of having to rely on third party providers. This means they can control the user experience at every touchpoint – from the moment the customer logs on to the website or app up to the point when payment is approved.

Digital wallets in general make life easier for the consumer. They are simple and convenient to use, particularly on mobile, when entering your payment details can be fiddly and frustrating. You don't have to share your financial details, so they can often be more secure than cards, and you can also hold more than one currency.

Wallet-as-a-service has major benefits for merchants too. It takes away the time and expense of a merchant building a wallet out or having to get their own financial services license, obtaining the right regulatory approvals, or ensuring ongoing compliance with anti-money laundering, KYC, and regulation issues. Not only that, but by creating a more valuable tool and taking total ownership of the customer journey this means greater brand awareness, loyalty, and lifetime customer value. It’s a win-win.

But it’s the crypto industry where wallet-as-a-service has taken on its biggest role to date. At Paysafe, we refer to this as fiat wallet-as-a-service.

How fiat wallet-as-a-service helps crypto companies

According to our latest Lost in Transaction research study which examines changing payment habits and preferences, 30% of consumers globally who had purchased crypto in the previous month had used a digital wallet to do so. This was second only to debit cards (44%) and credit cards (31%). Given the benefits outlined above, this is perhaps not surprising.

Many crypto companies are now offering digital wallets to store cryptocurrencies, but to actually take payments and provide on-ramps and off-ramps, regulated money licenses across regions and within individual countries are required, which presents significant barriers to being handled in house.

Over the past few years, we’ve seen some banks dip their toe in the crypto market to offer universal payment methods like wire services to expedite fiat movement. However, the impact of the ‘crypto winter’ which has seen the collapse of major exchanges like Lunar and FTX, coupled with the downfall of some of the more crypto-friendly banks, such as Silicon Valley Bank and Signature Bank, has stoked fear in the market.

Many banks are at the very least taking a more conservative view towards investments in crypto and crypto-friendly products and services, and many are exiting the crypto market altogether. The disappearance of banking partners, particularly to support the geographical expansion of crypto businesses, makes the role of fiat wallet-as-a-service more critical than ever.

Fiat wallet-as-a-service involves embedding a licensed and regulated wallet with onramp and offramp features allows customers to hold, receive and send fiat money across payment and banking rails using white-label branded IBANs, removing the reliance on banks.

Not only that, but using a fiat wallet-as-a-service can transform acceptance rates by clearing the pathway to tailored crypto payment acquiring services, local payment methods and alternative payment methods, like digital wallets, bank transfer payments or online cash solutions.

Fiat wallet-as-a-service: where to start

Embedding a wallet into a cryptocurrency platform or service can take the pain out of crypto payments and open up new opportunities for growth and international expansion. But the reality is that building one from the ground up is unlikely to be feasible for most digital asset or crypto businesses due to the technology expertise, financial services licenses, regulatory approvals and levels of compliance required.

Payment services providers offer a comprehensive, ready-made fiat wallet-as-a-service which can be white-labelled to avoid the time and expense of building it out and getting the necessary licenses but it’s important to partner with the right one.

Consider the ease of integration, the quality of operational resources and ongoing support, their licenses and regulatory relationships, plus the strength of their risk and compliance functions. The best payment services providers will have systems in place to ensure merchants stay compliant with regulatory rules and security standards, and robust risk management tools and expertise to help them identify suspicious activity and stop it in its tracks.

Using fiat wallet-as-a-service will not only transform conversion rates and enable growth into new territories. It will enable cryptocurrency businesses to offer customers greater value and convenience, a more personalised service, and to be more deeply integrated into their lives.

Want to learn more about our fiat wallet-as-a-service product? Visit https://www.paysafe.com/en/embedded-wallets/

This article is not intended to be financial, investment or trading advice. This article is solely for information and education purposes. It does not protect against any financial loss, risk or fraud.
Cryptocurrencies are unregulated in the UK. Capital Gains Tax or other taxes may apply. The value of investments is variable and can go down as well as up.