21 Mar Overwhelmed: Study details Coinbase customer service failures
Recently, consumer research group Value Penguin chief data scientist Dr David Ascienzo, published a report looking at the dramatic rise in consumer complaints about cryptocurrency trading at San Francisco-based cryptocurrency exchange Coinbase.
In preparing his study, he looked at more than 2,000 complaints received by the US Consumer Financial Protection Bureau (CFPB) over financial issues with Coinbase between June 1, 2017 and March 1, 2018.
The results are both unsettling and a wake-up call for cryptocurrency exchanges around the world and their efforts to serve customers and investors better.
Bitcoin volatility sent CFPB complaints skyrocketing
The run-up in bitcoin prices hit a peak in December 2017. So did complaints to CFPB.
Dr Ascienzo reports:
“Higher numbers of complaints rolled in just as prices started crashing, reaching a climax during the week of sharpest descent. Even then, BTC prices didn’t fall anywhere near where they were in the earlier half of 2017, but the data shows an array of negative experiences for consumers struggling to manage their coins when it mattered the most. These complaints bring to light the technical issues, nuances, and risks involved in the volatile world of cryptocurrency trading.“
Dr Ascienzo has advice for cryptocurrency exchange customers:
“Consumers should understand that glitches, delays, and account problems can happen to anyone, but these issues shouldn’t be something they simply accept as being part of the nature of using cryptocurrency exchanges. Speaking up about technical difficulties and poor customer service will hopefully highlight key areas that exchanges need to improve.”
Coinbase overwhelmed, systems failed
Media reports of Coinbase’s problems were widespread and negative beginning in mid-December 2017 and carrying through the end of January 2018. Customer complaints and social media were understandably vicious and negative.
Here were just a few headlines on Coinbase exchange’s inability to deal with new account sign-ups, handle customer complaints, respond quickly to transaction problems and customer withdrawal issues:
“Platform ‘slow to hand over bitcoin gains’” [The Times]
“Coinbase hit with second class action lawsuit for violating ‘unclaimed property’ laws” [Bitcoinists]
“Coinbase Tells Overcharged Customers to Talk to the Bank” [PYMNTS.com]
“Coinbase: Is it a scam as users complain of withdrawal issues?” [Information Age]
“The US’s leading Bitcoin exchange is draining tens of thousands of dollars from users’ bank accounts” [BGR.com]
“Should You Leave Coinbase? Some Bitcoiners Say Yes” [Investopedia]
But I digress.
The Value Penguin analysis continues:
“Wire transfer delays continued from December 15, 2017 until January 13, 2018, but were also accompanied by transaction delays between January 4 and 9 earlier this year, during the period of steepest descent in BTC prices. It was during this time period when the CFPB received a whopping 358 complaints about Coinbase in a single week. One particular consumer’s narrative reads, “[…] my sell order rejected because they shut down the exchange due to a computer glitch on their behalf. I lost out on a sale of about $100,000. I came back the next day to find the price crashed […].”
Coinbase was simply unable to respond to the huge number of new accounts – opening thousands daily in the frenzied run-up of bitcoin prices. It was unable to scale its customer support through a lack of experienced senior managers and business experience.
And when panic selling hit, it couldn’t process transactions fast enough. In a word – overwhelmed.
Here were the top five complaints from customers: money was not available when promised (40%); fraud or scams (11.7%); managing, opening or closing mobile wallet counts (7.9%); other service problems (7.9%); other transaction problems (20.5%); and other complaints (12%).
There are many takeaways from the Coinbase problems and research. Those top five customer complaints offer some sobering lessons for Coinbase and other cryptocurrency exchanges in the future.
“Cryptocurrency exchanges who struggled to serve their users during the recent price surge and fall need to learn from the experience. Investing more resources into technical and customer support teams may be the best place to start,” Dr Ascienzo said.
Dr Ascienzo concludes his report with three key takeaways worth noting:
“Consumer complaints surged as Bitcoin prices crashed. Complaints submitted to the CFPB boil down to technical issues with the exchange platform Coinbase and accusations of fraud.
Money being unavailable was the number one complaint. Consumers struggled to transfer and trade their cryptocurrencies at a critical time. Complaints spiked to a climax during the week where price decline was steepest.
High transaction volumes led to wire transfer and transaction delays. Customer support was difficult to reach for consumers.”
This is a short but valuable insight into how consumers and investors need to be protected and how cryptocurrency exchanges need to manage their business and customer service better in the future.
Looming just around the corner as well are always questions about security.
It’s no wonder the SEC, the G 20 and regulators around the world know they have to regulate cryptocurrencies somehow. It’s just going to take them some time to figure it out without killing the innovation, the technology and progressive solutions.
You can read the Value Penguin report here.
Author: Jeff Domansky, Managing Editor