The Problems With Onramps’ Processing Fees

You have probably heard of Moonpay, Sardine and Transak, which help you onramp from fiat to crypto natively on your app. This aids the user experience by enabling onramping at the point of purchase or into wallets. No more complex user journeys through centralized exchanges. 

Web3 products often ask us about finding the cheapest onramp rate. If your fiat to crypto onramp processor is offering you a low rate of 2.5%, should you take their offer? Here’s what goes under the hood and why onramp rates are not that simple.

The issues with finding the lowest onramp processing fees

1. Processing rates might just be a small part of total onramp costs 

Here are the rates offered by Transak. They offer 8% in Brazil on PIX (at the point of this article) and another onramp offers x%. Simple. Compare and pick the cheapest rate? Not so fast. Often significant costs for your users are buried elsewhere. What are their foreign exchange (FX) rates and network fees? How is the onramp implementing its swap mechanism? Some onramps uses a decentralized exchange (DEX) to onramp into different tokens, where gas or bridge fees occur. All of these can add up to significantly more than the “onramp fee” and are often undisclosed by the onramp. We estimate that this can range from 50% to 500% of processing fees.

2. No global pricing for local problems

Fees are also not consistent for the same onramp from market to market. These vary based on costs of licensing in each market, payment methods, and liquidity providers for the market. Let’s go back and take a look again at the onramp rates by Transak. At the time this article was written, they can offer fairly low rates on SEPA (bank transfers) in Europe, but this can go up by 8x in other markets. 

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3. Costs of transactions changes every minute

To make things more complicated, costs are volatile. Remember going to a currency exchange and seeing how the rates move all the time? Crypto is even more volatile! Your lowest cost provider this minute might not be the lowest cost provider the next (depending on their liquidity provider). To ensure your users always get the best price, you need to use multiple fiat-to-crypto onramps for each market.

4. Costs differs for every protocol or token

Even in the same market, some onramps provide great rates for one protocol or token and poor rates for another. This depends a lot on their liquidity provider and method of getting that liquidity. These onramp providers might have a good liquidity arrangement for one token. Or they might have an amazing volume from some partner for that token<>currency pair. Or they might have implemented a DEX to swap tokens into your users’ desired token. Regardless, bridge or gas costs should be factored in. 

Everytime lowest price

Poko’s Onramp Aggregator provides an everytime lowest price approach, considering the problems above. We provide a single integration for multiple and localized onramps (many focused on 1-2 markets) in key web3 markets allowing global coverage at local prices. The multiple onramps ensure business continuity (less risks) and guarantees your users always get the lowest price everytime they make a transaction. Users can save up to 60% in costs on average, versus using a single global onramp! 

Here’s a sample example in Brazil (using live rates from onramps):

Your users have just saved a whopping 16.4% of their entire transaction! FYI, this is 2.5x of what the onramp quotes as their processing fee. By offering the right local payments solution to users, web3 companies can grow their revenue by 5x and their crypto community exponentially.