The MoonPay Business Model – How Does MoonPay Make Money?

Executive Summary:

MoonPay is a FinTech company that allows users to purchase and sell cryptocurrencies using traditional payment methods such as bank transfers or credit cards.

MoonPay makes money via processing fees, payment fees, as well as a concierge service offered to wealthy clients.

Founded in 2018, MoonPay has become one of the fastest-growing cryptocurrency platforms. It is currently valued at $3.4 billion.

What Is MoonPay?

MoonPay is a FinTech company that allows users to purchase and sell cryptocurrencies using traditional payment methods.

These payment methods include bank transfers, debit or credit cards (MasterCard and Visa), and even Apple, Google, or Samsung Pay.

After a purchase is concluded, users can spend, send, or transact with that cryptocurrency on any supported exchange or wallet.

MoonPay handles the Know-Your-Customer (KYC) process to authenticate a user’s identity vis-à-vis partnerships with dedicated vendors around the globe that ensure compliance with local laws.

The firm also bears the time and financial costs of possible chargebacks or fraudulent transactions, which run prevalent in the crypto space.

MoonPay supports dozens of cryptocurrencies (currently well over 80), with new ones being added all the time.

Apart from its personal product, MoonPay also offers a solution for business customers that allows them to accept payments using cryptocurrencies. Example partners include Abra, OpenSea, Zengo, and many others.

MoonPay Company History

MoonPay, which is headquartered in Miami, Florida, was founded in 2018 by Ivan Soto-Wright and Victor Faramond. 

Soto-Wright, who graduated from The George Washington University with a bachelor’s degree in economics began his career at London-based financial consultancy Redington in 2012.

At Redington, he was mainly working as an independent advisor to pension funds and other long-term institutional investors.

He had previously met Redington’s founder Robert Gardner while studying abroad at Oxford University which he was able to attend due to his prowess in rowing.

After three years at the company, he finally took the plunge and launched his first business dubbed Saveable.

As the name suggests, the product would tap into a user’s bank account and automatically deduct a set amount of cash and put it into a savings account.

That is also where he ended up meeting Faramond whom he hired as Saveable’s Head of Engineering. Faramond had just wrapped up his computer science studies at one of France’s leading Ecole’s while having done software engineering stints at companies like Apple and Merck.

Although the business never really became a commercial success, Soto-Wright was ultimately able to get a regulatory license from the British authorities to hold a person’s money.

That prompted Plum, a company with a similar focus (but lacking regulatory approval) to buy him out in 2017.

While the exit sum was miniscule, Soto-Wright did have a couple of hundred thousand dollars at his disposal. This was because a friend of his, years prior, wrote his bachelor thesis about blockchains and told him to invest in Bitcoin.

Around the same time, the price of Bitcoin hit unprecedented heights, topping out at $20,000 at the end of 2017. And because the crypto world had been so kind to him, he decided to fully dedicate his professional career to it.

In 2018, he incorporated HODL.vc, a venture capital firm and company builder that would focus on incorporating blockchain-related businesses.

One of the biggest problems in crypto at the time were the high fees associated with depositing money. Platforms would charge up to 10 percent for a payment that wouldn’t cost more than a very low single-digit percentage in a traditional payment.

Given his previous experience in the FinTech space, Soto-Wright decided to build a wallet that would allow for much cheaper deposits and seamlessly interact with other exchanges.

One of the very first people that got wind of his new project was Roger Ver, the founder and CEO of cryptocurrency exchange Bitcoin.com. He invited Soto-Wright to fly out to Tokyo where the two struck a deal that led to MoonPay’s first integration with an exchange.

The deal provided MoonPay with an onramp into millions of customers almost right from the start. From there, the five-person-strong team continued to plug away by adding more cryptocurrencies, exchange partners, as well as custodians.

In 2019 alone, MoonPay was able to onboard more than a dozen of exchanges as partners. However, 2020 would prove to be the year where the team took advantage from the fruits of its labour.

Fuelled by the coronavirus pandemic, which not only led to lockdowns across the world but millions of people looking into investing their hard-earned cash (and sometimes stimulus checks) for the first time. Revenues grew by over 1000 percent that year alone.

Growth continued well into 2021, which proved to be even more of a successful year. In February, the team managed to secure in-principle approval for a Class 2 Virtual Financial Assets (VFA) Licence from the Malta Financial Services Authority.

Unfortunately, a month later, it also suffered its first-ever backlash. Hackers targeted MoonPay’s infrastructure, which ultimately led to a loss of $1.97 million worth of MIOTA. That same month, users had to wait for close to a week after transactions of WAX tokens didn’t properly go through.

Despite these hiccups, the company managed to cross its one millionth transaction not long after. Over the coming weeks and months, MoonPay continued to expand its product portfolio, for instance by offering NFT purchasing capabilities or by integrating with decentralized exchanges (DEX).

By June, the company also began to invest in other businesses, a tactic that is widely employed by the likes of Binance and Coinbase to uplift the whole crypto ecosystem and gain strategic insight into new verticals. That month, it invested in Moon’s pre-seed round and acquired a significant stake in BCB Group, a business-to-business (B2B) company that provides banking rails to digital currency firms.

A month later, it secured a crucial Money Transmitter license that allowed it to move cash across 16 states in the United States. The remaining states were added in the months thereafter.

In November, MoonPay finally raised its first-ever round of funding. World-class investors like Tiger Global Management poured $555 million into the company, which they valued at a whopping $3.4 billion.

The cash injection also allowed MoonPay to go on an advertising offense. While it didn’t spend hundreds of millions of dollars to put its name on a stadium (looking at you crypto.com and FTX), it was still able to convince celebrities like Post Malone or The Weeknd to promote its business.

How Does MoonPay Make Money?

MoonPay makes money via processing fees, payment fees, as well as a concierge service offered to wealthy clients.

Let’s take a closer look at each of these in the section below.

Processing & Payment Fees

The majority of the revenue that MoonPay generates comes from the processing and payment fees paid by both its retail as well as institutional clients.

On the consumer side, it charges a processing fee whenever a customer purchases or sells a cryptocurrency.

For card purchases, it applies a fee of 4.5 percent. For bank transfers, fees are equal to 1 percent for both purchases and sales.

On top of that, users will also have to pay the associated gas fees that are imposed by the blockchain network they transact with.

Similarly, it charges businesses a payment fee of 4.5 percent for card payments and 1 percent for bank transfers.

However, for bigger partners fees can be negotiated down depending on a variety of factors such as daily transaction volumes.

While these fees may appear steep, it has to be noted that MoonPay does not get to pocket the whole fee.

For credit card transactions, it has to share a portion of that payment with the card issuer, namely MasterCard or Visa.

On top of that, it works together with various custodians and fraud detection services, which also impose additional fees.

A plethora of similar services, such as Shakepay, have popped up as well. They all brand themselves as easy-to-use means to access crypto for the everyday person.

Concierge Service

Another, yet likely smaller source of income for MoonPay comes from the custodian services it provides to affluent individuals.

Through this service, it will purchase and store cryptocurrencies and non-fungible tokens (NFTs) on behalf of its clients.

The company has offered that service to celebrities like Post Malone, The Weeknd, Lil Baby, as well as Jimmy Fallon.

While not much is known, it can be assumed that MoonPay charges some sort of percentage management fee for those services.

MoonPay Funding, Revenue & Valuation

MoonPay, according to Crunchbase, has raised a total of $555 million across just one round of venture capital funding.

Investors in the company include Tiger Global Management, Coatue, Blossom Capital, Paradigm, NEA, and Thrive Capital.

MoonPay is currently being valued at $3.4 billion after raising its first-ever round of funding in November 2021.

During that very same funding announcement, CEO Soto-Wright also disclosed that MoonPay is expected to generate $150 million in revenue for 2021, representing a 35-fold increase from the year prior.

Hi folks, Viktor checking in! Years of experience in various tech-related roles have led me to start this blog, which I hope provides you with as much enjoyment to read as I have writing the content.