Founder Notes
How To Design A Crypto-Exchange App for Money Transfers
Creating a cryptocurrency exchange app is an excellent way for fintech entrepreneurs to share in the profits of the crypto boom. As trading volumes increase globally, interest in trading platforms will rise along with it, and each new user represents a potential customer.

In creating an exchange app, fintech entrepreneurs need to consider the pain points they want to solve with a platform. That means picking a specific user base and responding to their needs.

Is the goal to tap into the remittance market and reach the billions of underserved or unbanked across the world? Or is it to engage the millions of users who treat cryptocurrency like an asset class that can be strategically bought and sold?

For the purposes of this article, let's assume you want to build an app for remittance users and explore the steps involved in building a minimum viable product.

What are the pain points for a remittance user?

Pain points in the remittance market include an expensive transaction fee, lengthy wait times, a legacy banking system based on paper money, and poor geographic coverage in some regions. The majority of remittance payments are from migrant workers, but these pain points exist for individual micro-payments and recurring monthly payments for business owners.

Established players like Western Union and Ria are slow to adjust the costs of their service despite the rise in fintech companies entering the market.

Given the legacy paint points at play, the value proposition behind a remittance trading platform is that it can let users send money across borders at a cheaper, faster rate than established players.

The key is offering a simple platform that does an excellent job responding to user pain points (too expensive, too complicated to use, too time consuming, etc). The process begins by choosing the right exchange model.

What are the main types of cryptocurrency exchange platforms?

Generally speaking, there are three crypto exchange models in use today. They are:

1. The Decentralized Model. Decentralized platforms facilitate peer-to-peer trade and do not hold individuals money for longer than is needed to perform the transaction. The most popular example is probably IDEX, Ethereum's trading platform. BitPesa is also an example of the decentralized model, offering payment processing services and international money transfers to individuals and businesses.

2. The Centralized Model. These are centralized platforms that hold individuals' money and facilitate the transfer between currencies and countries. They play the role of a middle-man for all money transfer and investment needs, in a role reminiscent of banks. Coinbase is the most popular example here, as are all the investment-related exchange platforms like Abra.

3. The Hybrid Model. The hybrid model offers the privacy benefits of the decentralized model with the liquidity benefits of the centralized model. The most popular example of the hybrid model is Qurrex, which was created in 2016 by experts in the financial markets. For many in fintech, the hybrid model represents the platform of the future because it combines elements of both the decentralized and centralized models.

Which model makes the most sense for the remittance market?

Although it is never wise to make premonitions about a product feature before researching the target customers, I tend to think the decentralized model is best-suited for the needs of a cross-border money transfer service. There are three primary reasons why I say this.

First, because it offers end-users (either business owners or individuals) the opportunity to benefit from the speed of blockchain technology without needing to interact with anything cryptocurrency related.

Second, the decentralized model is more cost effective to design and run because it does not have all the bells and whistles of a centralized, investment-focused app and it's accompanying heavy back-end.

Third, a decentralized platform is simple to use. A product that does one or two things really well is likely to be more successful than an all-in-one app.

However, there is every chance that my hypotheses about the decentralized model are wrong. In creating a new fintech product, you will only know what kind of features to include once you isolate pain points in a target market. This is step 1 of the product development process.

Step 1: Discovering A Target Market

Every user is unique. Finding pockets of users with similar pain points is the end goal of target market analysis, and in going about your research, it helps to gather information focused around the four W's:

Who is my target audience?

What are my buyer personas? What sort of use do they currently make of money transfers? How often and how much?

What is it they want and what pain points are they experiencing?

Do they have to borrow money while waiting for a wire transfer to go through? Are they unable to make frequent trips to physical money transfer locations? Are they evident drawbacks to the existing service that could be measurably improved upon?

Where do they live?

Locate some of the most untapped corridors for the app you want to build. Doing research in these areas is vital to understanding what service pain points exist that you can capitalize on.

Why have competitors failed to meet their needs?

Do a full competitive analysis in the target market to clarify what the competition does and does not offer.

In collecting information about your target audience, you can use mobile surveys, perform user interviews, and build a site with basic information about the mobile application (mostly for educational purposes and lead generation).

Coming up with answers to these questions will determine what sort of pain points your target audience is experience, and will in turn inform the type of platform to design. Striking a balance between pain points and product features is step 2 of the product development process.

Step 2: Finding a Product Market Fit

Once you have a general list of the paints points for remittance users, you can begin exploring product-market fit. This means turning the results of target market analysis into an aesthetically pleasing product.

Features of an Effective Platform

Since we're not placing the microscope over one specific region, I want to run down some strategic points that app developers and entrepreneurs should account for in a cryptocurrency exchange app. In general terms, apps should be:

Easy to install for the userDeposit and withdrawal options for fiat and cryptocurrencySimple UXA display of personal transaction historyEngaging visualsTop quality securityMinimal delay time for the user24/7 customer service

The first iteration of a product is always a starting point - a benchmark for progress that should be incrementally improved as you collect customers and gather insight from analyzing their behavior.

No matter the target market, a successful platform is one that can adapt to user preferences.

Applying this principle means taking a lean approach to product development and only incorporating features gleaned from customer research. The application of all these ideas happens in step 3.

Step 3: Planning and Building the Platform

In looking at the technical specs of a cryptocurrency exchange app for mobile, it helps to think of a new product like you are building a house. Just like building a house, you want to start with the foundation - the logic being that If the underlying structure is sound, it will be able to accommodate additions and updates over time.

With an app exchange platform, the foundation is the back-end code, which in this case must be compatible with Bitcoin. Although the script for Bitcoin is not excessively long or complex, it needs to be integrated (along with other processing features) without causing pain points for the end-user like lag or security concerns.

Here are three foundational features of an exchange application that absolutely must be present, along with a discussion of the services offered by an open source infrastructure, Bitcore, which was established to "build Bitcoin and blockchain-based applications for the next generation of financial technology."

The Bitcoin Script

The first step is installing the script to run blockchain transactions. There are a host of Bitcoin scripts available for purchase across the internet. The open source nature of the exchange supports the proliferation of script for all different needs. Some are free and others come in a design package offered up by web development companies.

In building a product for remittance users, the abiding goal should be to keep the code clean and simple, implementing only the applications that help sustain the easy storage of money and the simple transfer of funds.

The basic applications offered by Bitcore Node are an excellent starting point because you get the script plus an application programming interface (or API). The Bitcore Node offers documentation services to handle fee queries, the management of new blocks, time stamping of events, the peer-to-peer network, and web integration that allows for API messaging.

The complement to the back-end API is the Insight UI, a simple and engaging user-facing software for the Bitcore Node.

A Top-Notch API

No matter if you decide to hire an in-house development team or go with a white label option, you will need a resilient and fast API.

An application programming interface(or API) is the most crucial component of a crypto exchange application. The API is the sub-architecture of the mobile app itself; it sends and receives requests across the network.

As Peter Gazarov describes, the API makes it possible for users to perform transactions on your page, and since the end goal is to have millions of transactions passing daily, getting this application right is pivotal.

The core technology of the payment application will likely entail setting up API's with banks and mobile phone providers, which adds extra layers of complexity to the back-end. The Bitcore Node offers an excellent resource here, as the Bitcore API has the lean and functional features needed for money transfer usability. The Bitcore library already offers a range of transaction code, including payment protocol, peer-to-peer networking, and micropayment channels.

Wallet Integration

Everyone who trades in cryptocurrency has a wallet. They are the means through which money is stored and sent between individuals in the ledger, and every crypto exchange platform has its own type of wallet integration.

Wallet integration options offered by Bitcore Node are quite wide-ranging. According to the Bitcore site, the wallet service facilitates the creation of HD wallets through a REST API.

It is important to note that, in the creation of a new wallet, the copayer creates a secret wallet with a private key. The copayer then needs to use this private key information when joining the wallet to ensure authenticity. Creating a wallet is a requirement for any users looking to store money for investment purposes, while users looking only to send cross-border money transfers do not require a wallet. This is the domain of the service provider (like BitPesa, for example).

Bringing It All Together

Designing a crypto exchange platform for money transfers is a potentially lucrative endeavor. As the technology becomes more refined and mass-marketable, an opportunity presents itself for fintech companies to scale with this exciting new technology. The challenge is finding a niche in the market and designing a powerful application that users who still know nothing about Bitcoin can benefit from.

ABOUT THE AUTHOR

Nick Tarsi is an Associate Partner with Morgan Hill Partner's based in the Tampa area. Nick works with tech-enabled client companies to help them go from start-up to scale-up. Nick has 3 years experience in management consulting, with a specific interest on emerging technology and change management. He has combined his professional experience with personal passions, including blockchain and decentralized organizations, to provide clients with the vision and execution needed to excel in their respective areas.