The application of cryptocurrencies and their adoption would have been impossible if they had no integrated means of being used as a means of payment. Unfortunately, the lack of widespread and systematic education on blockchain technology and cryptocurrencies means that by far not all people have the knowledge about how to accept or send cryptocurrencies, even if they have any. This means that cryptocurrencies are reliant on applications, both software and hardware, to be used as a means of payment.
This is where cryptocurrency payment gateways come into play, acting as a replication and mirror image of traditional payment services and transaction processors. These are familiar to virtually anyone by virtue of them used in banks for processing payments from cards like VISA and MasterCard. The applications used for such operations are the all too familiar mobile banking apps with instant payment options via QR code of payment link, and the NFC payment terminal.
As cryptocurrencies gain prominence and more people start owning them, merchants worldwide are facing the need to start offering potential clients the option of paying using cryptocurrencies. This demand has led to the emergence of a host of crypto payment gateway services that can be integrated via API into a merchant’s website, effectively streamlining the user’s payment experience to a few clicks.
But such optionality also comes as a price, which is what crypto acquiring is all about – paying a small fee from every transaction as a tradeoff for receiving the convenience of paying in cryptocurrencies.
Crypto Acquiring
By connecting a crypto payment gateway to their websites, merchants gain the ability to receive payment from customers for their goods and services in a range of cryptocurrencies like Bitcoin, TON, Ethereum, and a host of others. The procedure is a demanding one, since the merchant will have to integrate a special software suite that will process incoming cryptocurrency transactions, transfer the funds, convert them to a certain fiat currency, if necessary, and ensure the security of the entire system.
The traditional means of doing so for bank cards was provided by VISA and MasterCard, as well as some minor payment gateway providers. However, cryptocurrencies require a slightly different approach, since they involve the presence of a blockchain wallet that acts as an accepting repository for the incoming transaction. Some crypto payment gateway providers offer instant transfer and conversion of the cryptocurrencies to a bank account with all related legal paperwork.
The inherent advantages of using cryptocurrencies as a means of payment are also carried over to this type of gateway, offering faster transaction processing, higher security, lower fees, and the ability to tap into a new and progressive audience of clients who are pro-crypto. The adoption of crypto payment gateways is a favorable move on the part of merchants, since VISA and MasterCard provide licenses for the issuance of bank cards that support them as gateways to special crypto bank card providers, making crypto payments even more streamlined and indistinguishable from traditional banking.
The Fees
Every crypto acquiring service has its own fees applied for using the gateway. However, most providers are obliged to abide by the general fees set by the validators of the networks they operate with. This factor determines much, since the validators are responsible for processing incoming and outgoing transactions and also charge a fee for their efforts.
To offset the fees placed by the validators, the crypto acquiring company places these charges on the merchants by default, adding to it a markup price that constitutes the calculated commission that includes its operating costs, as well as a premium. When choosing a service provider for integrating crypto acquiring, merchants should examine these factors and decide just how much of the commission will be attributed to validators, and how much is the service’s markup or profit.
The Pros and Cons of Crypto Acquiring Services
The use of cryptocurrencies as a means of payment comes along with all of their inherent qualities and drawbacks. Among the most obvious advantages are lower fees, complete transparency, lower transaction processing times, and greater versatility. However, many merchants are still reluctant to integrate an acquiring service, since they do not have the necessary knowledge about how cryptocurrencies work and how they can benefit them.
The Pros:
- Elimination of issues with client anonymity, providing clear payment details and their immutable tethering to a specific user. The user can also maintain their privacy and remain anonymous, but their details will be provided to the accepting party.
- Ease of payment via familiar mechanics – bank card payment via terminal, or payment link on a merchant website.
- Global acceptance, since users from anywhere, even sanctioned countries, can use cryptocurrencies to pay for goods and services.
- Custodial security ensured by the service provider, granting a guaranteed contact line and payment provision.
- Ease of onboarding into cryptocurrencies via direct integration of the service by a third-party specialist, leaving the merchant only with the functionality needed to manage payments and funds.
- Mitigation of volatility risks, since payments are made in real-time and fix cryptocurrency prices at the moment of payment.
The Cons:
- Third-party involvement, negating the essence of cryptocurrencies as a peer-to-peer means of payment.
- Counterparty risk, since the service provider may go bankrupt or may operate in a different global time zone, raising support issues.
- Unnecessary intermediary inclusion in the merchant-client chain, since both can interact via chat and exchange payment details for instant wallet-to-wallet transfer.
- Higher fees if compared to direct wallet-to-wallet transfers.
- Security concerns on the provider side
Key Takeaways
The idea behind the introduction of cryptocurrencies was to make them an instrument for peer-to-peer transactions, thus eliminating intermediaries in the chain between both parties to the transaction. This very concept makes it difficult to grasp for the majority of users who are used to fiat and an asset and commodity based economy. However, the shift to greater diversification and the introduction of digital state-issued assets, such as CBDCs, is signaling the growing adoption of cryptocurrencies, pushing a growing number of users to explore the prospects of the digital economy.
Merchants are at the forefront of this upheaval, as they act as the main hubs of economic activity, ensuring the continued circulation of funds. As such, allowing merchants to integrate crypto acquiring is a powerful stimulus for users to start experimenting with such a novel payment method. The main reservations that merchants still have about crypto acquiring pertains to the level of provided service and support measures, as well as security. However, as experience indicates, all of these concerns are unfounded, since the vast majority of crypto acquiring services simply replicate the procedures of traditional banks, adopting their security layers and methods of operation.
