Finding Payment Solutions for FX Brokers:
Today let’s talk about Money: Forex Payment Systems and Payment Systems Providers often called PSPs.
This post will get into deposits only – when traders make deposits to Brokers, we will talk about withdrawals another time.
When setting up a new brokerage many do not anticipate the problems of funding: accepting funds from your clients.
Therefore, the banking and Payment Processing often goes overlooked till the last moment.
There is no good way to find a solid permanent payment solution quickly so you really have to think about it at the very start.
Today I’d like to share our experience and our way of assisting future Brokers when it comes to payment processing.
First of all let’s break down the few strategies of payment processing,
We break them down into 5 major categories:
- Bank Transfers
- Actual PSPs, Payment Gateways and Wallets
- Payment Aggregators and Cashier Services
- Local Depositors
- Crypto Payments
First of all, let’s look closely at one of the oldest on the list , most orthodox, but still very much common way of payment: Bank Transfer.
This type of transfer predates the internet so most of the time there is no way for the CRM to authenticate the payment to automatically deposit it into the trading platform,
Therefore you need to:
- Receive the payment
- Verify the sender (usually by the transaction memo traders leave while making the transaction with bank)
- Make the deposit into the trading account of the sender manually.
As you can see there is a big human element here, therefore there is a lot of space for human error:
- The Trader may forget the transaction memo,
- The customer support agent responsible can make a mistake typing in the deposit amount,
- or just make a mistake on the currency conversion rate.
Still, it is one of the most common ways to transfer funds to Brokers,
so one thing that we as a CRM and Backoffice provider can do is ask Traders to upload the transfer confirmation from the Bank to their Backoffice after they make the wire.
This way customer support agents, in addition to receiving notifications of incoming transaction in your bank, also receive a task from the CRM generated by the trader uploading the proof of transfer, therefore minimizing the chance of human error.
Payment Systems Providers, Gateways and Wallets
This is the most common category, and while there is a difference between those 3,
But in essence these are internet-age products therefore there is no need for a human role to authenticate, approve, and deposit transactions processed via these types of PSPs. You integrate them once and you can automate your deposits.
Now the CHALLENGE is to find a reliable provider with reasonable fees. Unlike IT or other E-commerce industries, Forex Brokerages, (and especially offshore Brokers) are considered High Risk businesses, therefore it is very hard or impossible to get an account from a reliable regulated payment system provider at low cost.
There is still a way though, there are still a good number of well-established providers that focus on this industry… although their fees are usually a bit higher.
THIS brings me to the next category: Payment Aggregators and Cashier Services.
Essentially these types of systems act as middleware between your CRM and MULTIPLE PSPs.
SO when you integrate with one Payment aggregator or Cashier you automatically integrate with MULTIPLE PSPs. It could be One, Two, or a hundred PSPs at once.
Sometimes they also have preferred partners, meaning they can help you sign up for a PSP.
These systems also allow you to route customer payments, for example by a client’s geographical location or by the PSPs daily limits.
There is a difference between a Cashier and Aggregator as well: the Cashier gets to hold yours or clients funds therefore may be a subject to regulations.
Payment Aggregator doesn’t. Essentially it’s a technology that routes the credit card numbers of your client and CHANNELS them to one of the PSPs from the second category.
It is usually a simple but very robust and effective system that enables Brokers or other e-commerce merchants to integrate Multiple PSPs in one fell swoop!
In fact, Kenmore Design has a long standing partner called NinjaCharge that is a VERY typical example of Payment System Aggregators. Your Kenmore Design CRM comes with NinjaCharge integrated, therefore there are over 100 PSPs are readily available.
Actually if YOU want to know what those PSPs ARE just ask below or reach out to Kenmore Design.
Our Next category is Local Depositors.
These are not exactly PSPs, in fact not a PSPs at all, it’s a way to get access to trader’s funds via your OTHER clients such as IBs.
Here is an example: You designate some of your most trusted IBs as Local Depositors.
These IBs will bring you new traders. These TRADERS, once registered, will transfer funds for Deposit to the IB / Local Depositor that invited them.
Once this IB receives the funds,- he transfers an amount equal to Traders Deposit from their IB account to the account of that trader.
There are risks involved here, after all you trust the IB with your client funds, so from the side of the CRM we’ve put in a few functions that make this process smoother and more secure.
The process looks like this:
- The Trader initiates the Deposit uploading the confirmation of transfer to Backoffice.
- WE make sure that traders Deposit via Local Depositor does not exceed the balance of said Local depositor.
- Then. We notify the BROKER AND THE IB when a deposit is made
- Finally the IB approves the transfer of funds equal to the Traders Deposit from their IB account to the Client’s account.
In a similar way you can do a withdrawal, but it’s a subject of another video.
Now, let’s talk about the last Deposit Method Type: CRYPTO.
Deposits via Crypto are definitely the newest kind, therefore there are still quite a few rough edges.
The major one being its exchange to Fiat, BECAUSE not every brokerage is ready to go full crypto.
AND if you want to convert to Fiat upon receiving of funds you run into the same issue as with the PSPs, namely the KYC and Regulatory requirements.
Still IT IS possible, and many PSPs we integrated with via NinjaCharge PROCESS Crypto and convert to Fiat.
Every Kenmore Design CRM deployment comes with a built-in Bitcoin Deposit method, though we do not convert, we just verify the deposit, FUND the Trading Account, and Send the crypto to the Broker’s Wallet.
Many of our clients today OPERATE with USDt, it’s a stable-coin tied to the value of the US Dollar.
In MOST cases USDt transferers are handled the same way as the Bank Transfers from our first category.
The Trader uploads the transfer confirmation to the backoffice , and the Broker verifies the Wallet transaction Against the confirmation uploaded by the trader…. And THAT’S IT!
In conclusion I want to stress the fact that YOU should look into this EVEN before you start the process of setting up the brokerage.
It is also in the brokers best interest to minimize the risks. It is a high risk industry after all.
Make sure you don’t put all your eggs in one basket,
You should aim to accept funds via multiple channels.
You can implement all the above mentioned payment methods into your system,
THIS WAY you mitigate the risk of one of them failing.
Get started with a demo now!