What’s next for Worldpay’s fast-expanding crypto business?

After getting into the crypto game early, Worldpay has quietly laid down deep roots in the sector.  

The payments processor, which formed in 1971 and was acquired by American financial services firm FIS in 2019, has been helping to funnel cash into crypto services since 2013.

It has 20 crypto exchange clients, including Coinbase, Binance, MoonPay and Luno. It has its own crypto “vertical” internally — one of just eight zones of focus for the company alongside things like travel and hospitality. 

And Worldpay has, according to company president Jim Johnson, tripled the size of its crypto team over the past 12 months, hiring 50 people this year alone.

The lack of fanfare surrounding Worldpay’s crypto business comes as something of a surprise when one considers the excitement triggered when, on October 12, rival payments firm Stripe announced its return to the crypto market.

Payment processors have a crucial part to play in the creation of so-called “on and off ramps” — methods of moving fiat money into and out of crypto services. Broadly, Worldpay’s technology helps merchants accept payments. In the context of crypto, that means partnering with wallets and exchanges to facilitate payments into those services with credit and debit cards.

“We facilitate all the fraud checking, KYC [Know Your Customer] checking, AML [Anti-Money Laundering] checking, authorize the transaction and fulfill all the funds movement,” explains Johnson, over a coffee in London.  

“The burden to be able to get to the point to transact and enable these transactions — it’s a high bar and it’s cumbersome and it requires a lot of specific vertical expertise,” Johnson continues. “We’ve been at it for eight years and we think we’re the premier experts in the business.”

Good gatekeeping

The role fulfilled by Worldpay — essentially a gatekeeper to some of the world’s biggest crypto exchanges — is in some ways a precarious one, given the regulatory uncertainty surrounding crypto.

Take Binance, for example. The sprawling crypto exchange has this year been hit with stern regulatory warnings in the United Kingdom, Europe, Hong Kong, South Africa, Malaysia and beyond, and in several jurisdictions it has been forced to suspend certain services, such as derivatives trading.

Despite these suspensions, Binance continues to offer a wide array of products to customers around the world and, due to a unique corporate structure that leaves the headquarters of the business ambiguous, appears partially immune to regulatory crackdowns. The U.K.’s Financial Conduct Authority concluded exactly that in the aftermath of its attempt to ban Binance Markets Limited, Binance’s local entity, from undertaking regulated activity in the country.

Binance’s partners, on the other hand, are more vulnerable — in large part because they are usually very unambiguously domiciled within the jurisdiction of a national regulator. Clear Junction, for example, announced in July that, due to the FCA’s actions, it had suspended payments to Binance and would no longer facilitate deposits or withdrawals for the exchange.

Other service providers, like Visa and Mastercard, have stuck with the embattled exchange. Worldpay has too — although a spokesperson clarified that Worldpay does not support Binance’s derivatives business, which has drawn particular scrutiny from regulators.

“What I would tell you is Binance continues to meet our thresholds,” says Johnson. “Obviously we’re only going to process transactions we feel comfortable with. So we’ve continued to work with Binance to ensure they’re meeting the standards we hold for ourselves.”

The standards it imposes on crypto companies, Johnson adds, are often higher than what Worldpay applies to companies in other sectors. And they had better be, because Worldpay is now finding ways to filter crypto into bank accounts.

In May, FIS struck an agreement with NYDIG, the crypto custodian, to give banks a way to offer their customers crypto investment tools and a way to hold crypto within bank accounts. The first bank to sign up was New York-based digital bank Quontic Bank; a press release from the time described it as the first FDIC-insured financial institution in the United States to launch a bitcoin rewards debit card.

The product is still in its infancy, Johnson says, “but it will be available to our entire fleet of banking clients.”

What’s next?

It makes sense, in the context of a rapidly growing crypto market, that Worldpay — and indeed other fintech firms aiming for a piece of the crypto market — has focused mostly on getting money into exchanges and wallets. Supporting crypto-denominated pay-outs is next on the agenda, according to Johnson.

“We’re very active on payouts, but more importantly many of our customers have expressed an interest in actually getting settled — settling their funds — in crypto,” he adds.

A post on FIS’s website provides a walkthrough of how payment processing works. To summarize, when a customer uses their card to make a purchase, the merchant sends a transaction request to its payment processor. The processor then sends the request on to the credit card network, which in turn sends it to the card issuer, which either approves or declines the request.

If approved, approval messages are sent back down the chain to the merchant. Clearing and settlement then take place. Clearing refers to the process of the card-issuing bank exchanging payment information with the merchant acquiring bank. The transaction is settled through the transfer of funds. Worldpay’s clients are calling for those funds to be paid out in bitcoin, irrespective of whether their own customers are paying for goods in crypto.

“We’re definitely getting some interest in that,” says Johnson. “It has nothing to do with the tender type used to purchase the goods. This is all about how you want to get settled.”

Non-fungible tokens (NFTs) are on Worldpay’s radar too. “You’re hearing every day that building and supporting the marketplaces for those are going to be very important,” says Johnson.

Card giant Visa signaled its intentions to bolster the NFT sector in August with a token $150,000 purchase of a CryptoPunk. The company’s head of crypto Cuy Sheffield said in a blog post that NFTs “will play an important role in the future of retail, social media, entertainment and commerce.”

Worldpay’s crypto partners are also branching out into NFTs after a record-breaking summer of trading on top marketplaces like OpenSea. Coinbase recently opened a waiting list for its upcoming NFT product, attracting more than a million registrations in a matter of days.

WorldPay has no NFT-related details to share as yet, but Johnson says the crypto team at FIS are “actively engaged" in thinking about how to serve NFT marketplaces. “I think that fits very closely with the type of activity that we support.”