Crypto payment processing
What is crypto payment processing?
Crypto payment processing means the processing of transactions made in cryptocurrency. As payments in cryptocurrency are slowly becoming as widespread as payments in fiat money, crypto payment processors and cryptocurrency payment gateways are gaining popularity. This generates the birth of a new process called crypto payment processing – the processing of payments made in cryptocurrencies.
What is a cryptocurrency payment?
It's a payment made with a cryptocurrency as a means of payment instead of fiat money.
Pros and cons of crypto payments processing
While there are many advantages to using crypto payment processing, there are also some potential downsides that should be considered when choosing this model for your online business.
Advantages of crypto payment processing
- Independent. Crypto payments are decentralised – they are not controlled by any central authority or institution, which makes such transactions faster, cheaper, and more secure.
- Fast and secure. Crypto transactions are processed quickly, and the blockchain technology used to process them is highly secure.
- Cost-efficient. Due to the absence of intermediaries involved in the process, transaction fees for crypto payments are generally lower than traditional payment methods, such as credit cards or bank transfers.
- Globally accessible. Crypto payments can be made from anywhere in the world, and there are no restrictions on who can make or receive payments. This makes it a great option for businesses that operate globally.
- Anonymous. Some cryptocurrencies offer a high degree of anonymity, which can be important for individuals who value privacy and security.
- No chargebacks. Chargebacks, which occur when a customer disputes a transaction, and the funds are returned to them, are impossible with crypto payments. This means that businesses don't have to worry about losing money due to chargebacks.
Overall, crypto payment processing offers many advantages, making it a great option for businesses looking to streamline their payment processes and reduce costs.
Disadvantages of crypto payments processing
- Volatility. One of the main features of cryptocurrencies is volatility. It is almost impossible to sell and buy, for instance, Ethereum or bitcoin cryptocurrency at the same price. That is why merchants who want to accept cryptocurrency payments risk receiving less than they intended.
- Scalability. The speed of cryptocurrency systems lags behind their fiat counterparts. The bitcoin network processes 4-5 transactions per second. The throughput of the Ethereum network is up to 30 transactions per second. The Ripple system allows for processing up to 1,500 transactions per second and EOS — up to 4,000. At the same time, Visa can process up to 24,000 transactions per second.
- Regulations. Cryptocurrency is not a legal tender in most jurisdictions, so accepting such payments sometimes creates legal difficulties for merchants. Problems also arise when paying taxes on income or profits that have been received in cryptocurrency.
Should you accept crypto payments?
The popularity of crypto payment processing as a business is growing along with the demand for fast electronic payments worldwide. And the strong demand for cryptocurrency payments is driving the growth of crypto payment gateways number, although this niche is still open to new players.
Here are the main reasons to start accepting crypto payments:
- Geographic coverage. Crypto payments solve the problem of payment landscape fragmentation. Users from almost any country can pay for the services or products of companies located in another country. With cards and e-wallets, this is often not possible.
- Reliability. Traditional processors or banks may decline a transaction for many reasons, such as a payment on a casino website. In such cases, cryptocurrency is the optimal solution: a blockchain wallet cannot block a transaction.
- Cost-efficiency. The cost of a crypto transaction is about 1% of the amount.
- Withdrawal speed. Processing of an e-wallet withdrawal can take about a week in some industries. Withdrawing in crypto happens several times quicker.
What is a crypto payment gateway?
A crypto payment gateway or a crypto payment processor is a service or platform that processes payments in digital currencies and allows merchants to accept cryptocurrency payments. It acts as an intermediary and carries out six main functions:
- Registers the crypto holder's or payer's data;
- Converts the amount at the specified exchange rate, if necessary;
- Executes verification (for example, via 3DS);
- Accepts cryptocurrency payments from a buyer;
- Sends transaction data to the blockchain and registers confirmations from nodes;
- Converts the received coins into fiat money (at the merchant’s request);
- Transfers payments to a merchant;
- Provides confirmation of payment processing for both parties.
Using a crypto payment processor, you can easily accept cryptocurrency payments and offer your clients more payment options to choose from.
How does a crypto payment gateway work?
To make a crypto payment, only the recipient's blockchain wallet address is required. The payer must copy and paste this address into the appropriate field in their own crypto wallet, enter the amount of payment, and confirm the transaction. While using a QR code, the process is even easier – just scan it and pay.
Types of popular crypto payment gateways
Generally, there are two models of crypto processing:
- Crypto-fiat. In this case, the merchant receives fiat money into his account due to the process called a conversion. The commission is, on average, 1% or more, but this adds regulatory, banking, and exchange risks; also, additional counterparties arise. This kind of business is more profitable and more difficult to run.
- Crypto-crypto. Purchasers make crypto payments, and merchants receive payments in this currency. Thus, the crypto payment processor does not use the banking infrastructure but, at the same time, earns very little because the transaction fees are about 0.5%, of which about 0.1% is spent on trading costs during the exchange.
In both cases, the crypto payment processor's performance assumes the conversion, cryptocurrency exchange rate risks, and payment to the seller's wallet. At the same time, the store gets the opportunity to attract a new potential audience with such alternative payment options.
How to accept bitcoin payments?
Creating your own crypto processing is a colossal waste of effort and money for contractors and merchants. There is a more profitable and quicker way – to integrate a ready-made solution provided by a payment system. In this case, your supplier takes over the development burden, the need to add new cryptocurrencies, and support users. Thus, business owners can concentrate on their primary tasks – developing the project, expanding their business, and improving service and products.
Corefy represents a convenient payment orchestration platform for your business. It enables you to accept payments and make payouts via over 400 methods and different currencies, including cryptocurrencies, via more than 650 providers.
If you want to start accepting cryptocurrency payments but don't want to dive deeply into learning their cogs and gears – we are ready to help. Partnering with a reliable crypto payment platform will allow you to boost your sales and gain more audience. Get in touch with our team to know more and find out how your business can benefit from our solutions.
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