Coinbase is a company which offers a product which sounds too good to be true – the ability for US customers to buy bitcoins from their bank accounts via an ACH transfer with a locked-in exchange rate of 1 above spot at the time the purchase is initiated. And now they’ve just announced their most exciting feature yet: instant purchases. Granted, it takes 30 days to become fully verified to get access to the maximum transaction limit, and instant purchases, but that’s a small price to pay because once you’re fully verified it’s smooth sailing after that, right?
Unfortunately even after completing all verification steps it’s not always smooth sailing. Ever since Coinbase opened up to ACH purchases, some users reported cancelled purchases, especially in cases when the exchange rate jumped between when the sale was initiated and when it was completed.
The typical scenario that these users describe is that the bank transfer clears according to their online banking, but approximately at the time when they promised in the initial purchase message that the bitcoins would be released, what happens instead is that the transaction gets cancelled.
I should note at this point that in almost every reported case, the individuals who contact support do eventually have the problem resolved to their satisfaction, and it’s likely that customers who have their orders cancelled after a drop in the exchange rate are probably less likely to complain about it.
This kind of problem was a lot more understandable back in February and March when they were just rolling out ACH buying to the public. Unfortunately, it’s still going on, and it’s still almost impossible to get help in a timely fashion when it does. The email itself is incredibly frustrating, because it give the user no indication of what they’ve done wrong or what they can do to fix the problem other than try again “in a few weeks”. Coinbase has no phone support available, and email support requests can take a few business days to receive a response.
As can be seen in several bitcointalk.org and Reddit forum threads started by frustrated customers, a lack of an explanation as to why their anti-fraud system has so many false positives leads some to question whether or not Coinbase cancels trades following large exchange rate fluctuation because it becomes more profitable to sell the bitcoins back on the exchange instead of delivering them to their users. This is the kind of speculation that is corrosive to a company’s public image, and can scare off new customers. If Coinbase had more robust and responsive support options so that users who encounter these problems can get assistance in a timely fashion, it would go a long way towards countering accusations of exchange rate shenanigans.
At the same time, their pricing structure doesn’t leave a lot of room for support staff or for losses caused by fraudulent purchases. With only a 1 commission on each sale, their entire operation must be largely automated and they have little margin available to hire a large support team. They also don’t want to give away information about their algorithm that would allow malicious users to bypass their fraud detection system.
There is one change they might consider which would alleviate the speculation though. Instead of immediately reversing a sale which trips the fraud filter, hold on to the bitcoins and give the customer a reasonable window in which to contact support and clear things up. This would at least allow the original purchase price to be honored and would refute accusations that the cancellations are related to changes in the exchange rate, while still prevent releasing bitcoins on a potentially fraudulent sale.
Coinbase is offering a service in the US market that is unmatched by any other company – the ability to buy bitcoins directly from a bank account at extraordinarily low prices. The only downside is that their low prices are necessarily bundled with limited support options. If they can find a way to strike a better balance between those two competing objectives it would remove a blemish from an otherwise excellent product.