It was established long before the internet. The networks and processes for doing business have been slow to adapt to the changes brought on by the internet. Although online payment and banking platforms are improving, many of the advancements have been made by fintech companies that are agile and more creative.

For example, the way banks defined ‘high risk’ companies used to be narrow and applied to a few niche industries. Since the introduction of the internet, there has been an increase in the number companies that are considered high risk. It is because it is possible to make money online in multiple currencies and this is considered suspicious and susceptible to fraud.

As shown by problems faced recently by Binance, buying, selling, or trading cryptocurrency is one sector seen as risky, despite governments increasingly exploring the idea of ‘Govcoins’. Other risky areas include eSport, gaming, online content creation, art sales, and eCommerce platforms.

These aren’t small industries. The Creator Economy, for example, is valued at around US$104.2 million. US$1.08billion is the size of the eSports industry in 2021. This market is forecast to reach $1.6 billion by 2024.

Another heavily penalized group is SMEs that operate internationally – especially those from developing nations, such as the EU list of ‘high-risk third countries’. SMEs represent around 99% in total businesses across all nations of the Organisation for Economic Co-operation and Development. Many face delays and are denied access to banking services, or they may be refused credit.

Because banks are unable to correctly categorize innovative business models, the technology-based advantages that the internet offers will continue to be embraced by more companies. Crypto platforms being one of the most troubled are ironic because cryptocurrency is a payment option for such industries.

Blockchain technology reduces the risk of cross-border transactions.

Because they are able to approach financial problems from completely new perspectives, fintech companies often lead the way in financial innovation. One such company that has found a solution for ‘high-risk’ ventures is XanPool and its platform XanPay.

XanPool’s founder and CEO, Jeffery Liu, explains, “We founded XanPool in 2019 to solve the problem of onboarding and offboarding from fiat currency to crypto. It can be difficult to purchase crypto as your money must be routed through legacy banks with its many fees, delays and lack of transparency. This is why we created a method to get around all this.

“This led to XanPool, which is essentially market-making software that lets buyers and sellers, liquidity providers, buy and sell cryptocurrencies using digital wallets or bank accounts. This allowed people to bypass legacy platforms like the banks, Visa (NYSE:), or SWIFT, and consequently avoid issues like the 3% merchant fee, unfavorable FX rates, the wait of three days or more for transactions, fund custody, chargeback risks, and all the other issues found with older infrastructure.”

With XanPool’s cryptocurrency and network of local currency liquidity providers, transactions were instant, cheaper, and carried no risk of chargebacks or credit card fraud. What’s more, Liu knew the structure could be applied to other issues. “We realized that we could use XanPool liquidity and peer-to-peer network to solve problems people were having with traditional payment platforms.

“For example, there are numerous solutions for P2P and large-scale transactions,” Liu says. “But if SMBs fall below transaction targets set by the international banking system, they are forced to use legacy infrastructures. Extra fees and delay can prove crippling for businesses with low margins.

“By using the XanPool network and cryptocurrency to route international payments, money can arrive with the merchant instantly, even from other countries. This also means there is no risk of credit card fraud and, unlike on a bank statement, all charges are clear and understandable,” Liu says.

The risk of transferring money with cryptocurrency is lower

The risks associated with high-risk business are reduced or eliminated by cryptocurrency. “There are several reasons why an enterprise might seem risky to a bank. One reason is that the enterprise may be operating in multiple countries, and this can also include multi-currency transactions. These companies could come from countries where there are high risk of chargebacks. Or a business might simply be new or not big enough,” Liu says.

Today’s online marketplace is full of smaller companies from different industries like gaming and content creation. SMBs can easily function at a global level thanks to technology – but the infrastructure wasn’t there to support it.

Liu adds, “With XanPay, we were able to solve these issues thanks to our structure. Because it’s instantaneous, there is no risk of chargebacks or issues with transparency. Merchants who use our platform report a drop in payment processing fees of over 40%. So not only are we providing a platform for those deemed high risk and previously had problems with payment solutions, but we are also decreasing what caused them to be classified as risky in the first place.”

Online gaming, cryptocurrency exchanges and cross-border merchants are all growing quickly in popularity and reach. The number of high-risk businesses will skyrocket if banks and traditional payment platforms keep using the current classification systems. While the bank system may eventually adapt, as it often is, fintech will have already solved the problem.

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