Can crypto fulfil potential without winning consumer trust?

By Fergal Parkinson
Fergal Parkinson, Director of TMT Analysis, explores the challenges crypto firms face in changing perceptions and winning consumer trust.

Currently, the UK’s crypto market is missing out on 13m customers due to the perceived lack of trust. Our recent research, suggests that these potential investors aren’t opting for other assets due to convenience or better returns elsewhere, they’re shunning crypto purely because they believe these assets pose security risks.

Of course, some of this is fuelled by scaremongering commentators wishing to portray the sector in a negative light. However, as with any innovation, there are clearly challenges that need to be overcome. But the recent struggles of some major names in the industry hasn’t done anything to
boost investor sentiment or confidence – Coinbase’s revenue has collapsed 61% in the last quarter, whilst German exchange Nuri recently filed for bankruptcy. Plus, the value of many assets across exchanges have collapsed recently, slashing the value of investor portfolios. Regulatory pressures aren’t helping either.

In the UK, once crypto firms were required to apply for approval under money laundering regulations, a huge 88% of applications were rejected by the FCA in a year. Clearly, there is an underlying issue at play. Regardless of the reasons behind these difficulties to secure FCA approval, the fact remains that crypto firms have a tough publicity job on their hands. Not only do they need to enhance awareness and understanding, they also need to tackle security risks - both real and perceived. Without this overhaul, crypto will struggle to fulfil its potential as a truly viable, global alternative to the current
monetary system. The FCA concerns are echoed by potential UK investors too.

Our recent research revealed that a quarter of adults stated that they would be willing to invest, or invest more, in crypto if they could be reassured about their security concerns around the market. Over half (54%) of UK adults distrust cryptocurrencies as they don’t believe the security processes in place are robust enough to protect investors. Perhaps unsurprisingly, there’s a greater sense of distrust amongst older investors, with almost two thirds (63%) of UK adults aged over 55 concerned over the security measures of crypto exchanges, compared to under half (42%) of 18-34 year olds. Potential investors have also given an indication to crypto firms of a potential way forward for the crypto industry. Almost half (45%) of UK adults believe that crypto will never become mainstream unless security and regulation are improved. Clearly, the people have spoken; without enhancing security measures, crypto businesses are at risk of failing to fulfil their potential and competing on a global level. 

What can crypto firms do to change perceptions and win consumer trust?

In order to ensure that mass adoption of crypto doesn’t become a pipe-dream, the crypto industry needs to demonstrate that it is listening to consumer concerns and introduce tighter security and anti-fraud measures to alleviate fears. This is also an issue across financial services more generally with many consumers concerned that the entire financial services sector is not doing enough to protect them from fraud – in fact, nearly half of the market (45%) think fraud is worse than it has ever been.

Our recent research offers guidance to compliance teams on which action they should take to boost security measures - nearly half of consumers do not think financial service providers have strong enough identification measures in place to protect them. There is a simple yet effective solution to counter this issue, simultaneously fighting fraud and reassuring consumers that the security measures in place are robust enough to offer protection. Mobile phones are almost ubiquitous across society. With almost 84% of the world’s population owning a smartphone, it makes sense for organisations of all size to incorporate this significant market penetration into their security measures too. Measures such as number verification are a vital step in fighting fraud and boosting consumer confidence in the market.

We’ve already seen new Strong Customer Authentication (SCA) rules introduced this year to check IDs before payments are processed and offer an extra layer of protection. By using a push notification to a mobile phone containing a code, or asking a customer to visit a banking app to prove their identity, consumer protection is greatly enhanced. Alternatively, payment providers such as Visa and Mastercard, have implemented techniques such as ‘3D-Secure’ to comply with Strong Customer Authentication (SCA). 3D-Secure asks a customer, using the same device that they are attempting the transaction with, to enter specific parts of their password.

The fact that mobiles are so integral to our lives means they must be placed at the heart of the financial services industry’s commitment to keep customers safe. People will nearly always have their smartphone in their pocket and so financial service providers must do all they can to use the mobile phones to verify identities and keep accounts secure. The length of time we keep the same mobile number makes it a powerful element of our digital identity; organisations can obtain rich and actionable mobile numbering data to strengthen and validate the user verification process, reduce fake accounts, give risk insights, improve conversations, and determine the optimal channel for message delivery. 

At TMT Analysis, we process over 60m numbers each day to help customers verify identities and fight fraud. The financial services sector has always had to abide by strong regulation to ensure customers feel protected. It is clear that cryptocurrencies are going to continue to be hampered in making their services mainstream without consumers feeling protected by strong regulation, as they have come to expect elsewhere in the industry. An appetite for alternative investments remains high but crypto businesses need to ensure they respond to consumer concerns in order to boost take-up.  Cryptos have the potential to transform the future of money and allow people to have greater control over their finances but currently too many potential investors remain wary of embracing the crypto revolution until security measures are enhanced.


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