Cryptocurrency adoption is at an all-time high, but there are still two main barriers preventing many crypto exchanges from going mainstream: 1. high rates of account takeover and other types of fraud and 2. inefficient customer onboarding. Let’s examine these two challenges and see what steps crypto exchanges can take to address them in order to mitigate fraud while also improving the customer experience for new users.

The Fraud Challenge for Crypto Exchanges

While reports of fraud have the potential to spark a publicity nightmare for any company, they can be especially devastating for crypto exchanges. Because crypto is still a relatively new industry, one bad headline can critically damage a company’s reputation and dramatically slow adoption rates in the industry for years to come. 

For the crypto industry, account takeovers such as SIM swap fraud and other social engineering scams are among the most common attacks. First, scammers trick victims into divulging personal information about themselves and then socially engineer customer service representatives to take over a victim's phone number by having them transfer the number to a SIM card in their possession. Once they've done this successfully, the fraudster takes complete control over the unsuspecting victim's phone number, allowing them full access to their crypto accounts. 

While losses from these types of attacks now number in the billions, there are steps and technologies that crypto exchanges can implement to protect their users by detecting fraudulent SIM swaps before fraudsters can drain money out of accounts.

The Customer Experience Challenge for Crypto Exchanges

While speedy and efficient onboarding procedures give companies in many industries a competitive advantage in the digital age, it is an especially critical metric for crypto exchanges. For example, while a customer at a bank may want to open a new checking account as quickly as possible, chances are they will be more patient than a would-be crypto investor eager to purchase Bitcoin during a run. To that point, onboarding flows for crypto exchanges also need to be highly efficient in processing large numbers of investors. If a spike in the value of Ethereum makes headlines, for example, crypto exchanges should be prepared to onboard a new wave of eager customers before they head over to a competitor’s site.

The reason that onboarding with a new exchange is often cumbersome, of course, has to do with the fraud challenge mentioned earlier in the article. In order to properly identity-proof and KYC a new user, a crypto exchange may need to employ time-consuming or high-effort processes such as knowledge-based authentication or document-scanning, and users may even need to experience a waiting period of several days or weeks before they can be cleared to trade. Needless to say, these processes often turn new users off, and in many cases, result in abandonment or loss of business to a competitor. Fortunately, new identity techniques are helping many top crypto exchanges not only make their onboarding processes faster and easier for users but are also strengthening the initial identity-proofing that takes place. 

Understanding the challenges above, here are the five things crypto exchanges can do to help mitigate fraud and accelerate their onboarding:

1. Leverage phone-centric identity technology to prevent fraud in the digital age: By taking advantage of dynamic phone signals and checking a Trust Score™, you can mitigate account takeover fraud by first confirming a phone number’s reputation before sending an SMS OTP. Learn more about how Trust Score works here.
2. When securing high-risk transactions, be a PRO: By PRO, we mean check the phone number’s possession (Is the user in possession of the phone?), reputation (Is this phone number associated with risky behavior? Has it undergone a recent SIM swap?), and ownership (Is the customer associated with the phone number?). If a user’s phone number passes all three checks, you can feel confident approving.
3. Accelerate onboarding by auto-populating forms with verified data: Today’s consumers are tired of filling out lengthy forms online. To take the pain out of form-filling, add Prove Pre- Fill™ to your onboarding flow. By auto-populating forms, Pre-Fill dramatically reduces the number of keystrokes a user must make to fill out a form and only auto-fills accurate data with consent from the user. It’s a win-win for both customers and crypto exchanges. 
4. Put a stop to synthetic identities: Because Prove Pre-Fill is informed by a wide array of authoritative data, it verifies consumer identities to thwart account opening fraud such as synthetic identity fraud.
5. FYI, KYC should be seamless: Instead of relying on multiple companies to run the necessary Anti-Money Laundering (AML) and Politically Exposed Persons (PEP) checks of your KYC flow, reduce your cost and complexity with no-cost KYC. 

When put into action, the above best practices can not only mitigate fraud for crypto exchanges they can also significantly improve the customer experience and decrease onboarding time while maintaining high security. Here are some examples of results that leading cryptocurrency exchanges have achieved using phone-centric technology:

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• Binance.US, a leading digital asset marketplace in the United States, is incorporating Prove’s mobile phone-based technology into its user verification and onboarding processes. This will bolster Binance.US’ customer onboarding process and enable Binance.US to continue accommodating new customers quickly and securely.
  
  “At Binance.US, our goal is to democratize access to digital asset ownership and facilitate simple and safe participation in cryptocurrency markets for all Americans. We selected Prove to help us achieve this goal after a rigorous evaluation and proof-of-concept test demonstrating Prove’s pass rates and ability to deliver seamless customer experiences,” said Brian Reisbeck, Chief Compliance Officer at Binance.US.
  
  Binance.US will be able to enhance its verification process with Prove’s Phone-Centric Identity™ technology, allowing users to get fully verified in under 10 minutes with proper identification. Prove’s technology rapidly verifies a potential customer using three key checks: possession, reputation, and ownership. Together, these factors deliver a powerful signal for more accurate identity verification and higher pass rates.
  
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• A top 3 crypto exchange had struggled with clients’ accounts being taken over through social engineering and SIM swap attacks. Since implementing Trust Score, they’ve been able to lock victims’ accounts before any money is withdrawn. In addition, by using insights from Trust Score to detect suspicious SIM swaps, they can identify and stop malicious activity before it impacts their customers.
  
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• Paxful, the leading global peer-to-peer FinTech platform with over seven million users, uses Prove to deliver a more seamless customer experience and onboarding process while enhancing accessibility to the exchange and simultaneously mitigating fraud.
  
  Ray Youssef, CEO & Co-founder of Paxful, said of the new partnership: “We are thrilled to partner with Prove. There’s no denying the rapidly growing interest in crypto investing – however, the industry has been faced with two major issues – accessibility and security. Our partnership with Prove will provide a seamless onboarding process for new users, strengthening safety and security for our platform’s entire community.”
  
  After incorporating Prove’s phone-centric identity solutions, including Prove Pre-Fill™, Identity Verify™, and Trust Score™, Paxful expects to be able to securely onboard customers in as little as 10 seconds or less. Additionally, with security features already trusted by eight out of the ten leading banks, Prove’s solutions are proven to decrease fraud by an average of 75% relative to the attack rate.
  

Are you ready to leverage phone-centric identity to mitigate fraud better and provide a more seamless user experience to your crypto customers? Contact us to learn more.