With the increasing acceptance of Bitcoin, together with customers on the lookout for companies that take Bitcoin for payment, many businesses have started offering cryptocurrency payment solutions to enable crypto payments. In the following, we look at how crypto processors work and how they compare with the traditional fiat payment processors.
What is Crypto Payment Processing?
A cryptocurrency payment service, or Bitcoin payment gateway, allows businesses to receive cryptocurrency as payment for goods and services. It works in a similar way to the traditional processors, with a few differences.
In both cases, a payment service procedure that enables authentication and processing of a transaction takes place. With traditional fiat processors, the payment service securely records and transmits the necessary details of the payment, authenticates the credentials and enables the transfer of money, issuing a confirmation to the parties involved.
Cryptocurrency payment processors work in similar way acting as an intermediary between the buyer and receiver for processing crypto payments, and also involves recording the transaction on the blockchain. They allow companies to accept Bitcoin for business online away from the complex background process of crypto payments taking place in the background.
How Does a Crypto Processor Work?
Anyone who wants to accept Bitcoin on site by signing up as a crypto payments provider can start receiving Bitcoin and other kinds of cryptocurrency payments such as Stellar payment from customers across the globe. A customer who chooses to make an online payment in crypto pays the amount at the exchange rate applicable at the time of the transaction. The crypto payment service then converts the crypto received into the currency of choice, reducing the risk of volatility, and the money is added to the account, finally being credited to a bank account. The service also sends the necessary details securely to the blockchain network for the transaction to be authenticated.
Advantages of Cryptocurrency Payment Services
Compared with traditional fiat payment processors, crypto payments are much cheaper due to lower transaction costs. Many cryptocurrency payment processors charge a flat 1% fee to the merchant, some as low as 0.5%, compared to 2% – 3% charged by a fiat processing service.
Cryptocurrency payment services allow for the seamless transfer of cryptos in any amount from everywhere across the globe, through any mobile or computer, to the merchant’s account in a currency of their choice. So, if a customer is, for example, looking for merchants accepting ethereum or perhaps, more specifically looking to make a Ripple payment, they can be assured that their needs will be catered for wherever they are located.
Cryptocurrency payment services also offer transparency in the highly dynamic exchange rates between crypto and fiat currency and give businesses access to a much safer, transparent and dependable way of receiving payments.
Crypto vs Fiat Payment Processors
The overall increasing acceptance of cryptocurrencies reflects the growing number of global users willing to make transactions in this way. The increasing influence of a parallel, borderless economy which is not controlled by any central authority is however putting the business of the traditional methods and payment service providers at risk.
Just over 10 years ago, all transactions were conducted in fiat currencies but with an increasing number of people switching to cryptocurrency transactions and the emergence of more and more websites that accept Bitcoin, providers of services linked to fiat currencies have felt the impact.
While for the foreseeable future, there will still be a requirement for fiat processing services, some of these providers are following the trends and have adopted Bitcoin technology to enable similar services under their established brand names in order to reap the rewards of crypto-based payments. If you’d like to learn how to accept Bitcoin at your business contact us today!