The marketplace model for ramps has outlived its usefulness

Many popular crypto wallets, decentralized exchanges (DEXs), and DeFi platforms operate on a marketplace model where users can choose from various on- and off-ramp providers. This model has spread throughout the crypto ecosystem over the last few years and has increasingly become seen as the best way to meet user needs. 

But while I think a marketplace model has served its purpose in bringing cost down, I now believe it’s holding the industry back. 

The model

Let’s first look at how these marketplaces operate. 

Almost all marketplaces look to provide their customers with the cheapest way to buy crypto. To achieve this, ramp providers are usually ranked in order of cheapest first. This may either be presented simply as a list sorted by price, or (in some cases with a stronger nudge) by attaching a “Preferred” label. 

This structure was a crucial stepping stone for the industry over the past three years. Prices were high and competition was needed. While I’d argue that it isn’t difficult to establish the cost basis for any ramp provider (e.g. credit cards are mostly a combination of interchange fee, acquirer fee, fraud losses and one-time KYC costs), competition in a marketplace is a proven price discovery mechanism, and it worked like a charm. 

Price over quality

Unfortunately, helping customers uncover the cheapest provider for every transaction comes at cost. A tradeoff occurs in which price is prioritized at the expense of quality.

Over the last 12 months, for example, ramps have started to exploit ranking mechanisms for their benefit: 

1. Funny business. We’ve noticed that many providers are consistently misquoting and hiding fees in areas not part of the marketplace’s price discovery mechanism. Customers see a price upfront, but then get requoted a significantly higher price further down the line.
   
2. Cheap customers. Some providers like Revolut are quoting transactions at a loss. This would make sense if they see the ramps product as a cheap acquisition channel for upselling other services, including crypto trading, to customers. Is this in the best interest of the platform or the customer?
   
3. Price goes up, price goes down. The current price-based model means if a ramp drops their price, they win more customers and their transaction volume goes up. We’ve observed ramps exploiting this to prop up volumes before investor calls or in the run-up to a fundraising event.

None of the above puts the customer first. Instead, the customer is being shoved around by ramp providers acting in their own best interest. While the broader crypto ecosystem can sometimes be guilty of this, the marketplace model seems to exacerbate the problem. 

Furthermore, customers have to KYC and get through fraud/onboarding controls every time they choose a new provider.

Anyone that’s ever been through KYC knows that it’s a painful process (not to mention it kills conversions). Asking customers to go through this process multiple times is akin to asking them to open a bank account every time they want to make a payment. I don’t know about you, but that sent a shiver down my spine.  

We won’t get mass adoption this way. The marketplace model for ramps needs an overhaul. 

A new path forward

I propose a new model designed to optimize UX and boost adoption. It has four key elements: 

1. Long-term contracts: Platforms should lock their preferred ramps provider in every region into a long-term contract with fixed costs based on pricing seen in marketplaces. This will ensure customers consistently get the best price.
   
2. User-focused design: Going deep with a chosen provider leads to more focus on building a better user experience. First-time buyers can be guided through the whole process, with checkout experiences on par with web 2.0.
   
3. Customer affinity: Instead of treating customers as transactional, platforms should develop a marketing program that fosters long-term relationships, maximizing lifetime value over per-transaction revenue. We see in our data that a customer active over a two-year period is 50x - that’s right, fifty times - more valuable than a customer that only transacts once.
   
4. Continuity of service: Backup providers can ensure consistent service in case of any issues. Platforms can even route a small amount of traffic to these fallback options to keep the relationship warm. 

Final thoughts

Crypto needs to become customer obsessed. 

That’s the hump we need to get over if we’re to drive mass adoption. Obviously I’m biased, but MoonPay has been obsessed with conversion rates, offering the fewest steps and the highest quality infrastructure to our partners. I see this obsession in everyone I work with every day, and we are committed to helping the ecosystem move towards a customer-obsessed mindset.