How does cryptocurrency payment processing work?
“The future of money is a digital currency.“
– Bill Gates
Do you believe that crypto is just another fleeting hype? The time is ripe for debunking the myth. Cryptocurrency is a dominant trend, shaping the face of eCommerce in 2020. Subway, PayPal, Shopify, and Facebook are already offering crypto as a payment method. What are you waiting for?
Let’s discover what cryptocurrency payment processing is, what types of crypto are the most popular today, and what documents you, as a company owner, have to provide to start accepting crypto.
What is a cryptocurrency?
Cryptocurrency is a digital asset. Cryptographic protocols that lay the ground for its technology make transactions secure and fraud-resistant. Unlike traditional credit card processing methods, cryptocurrency requires no bank-mediator.
Crypto is decentralized. Simply put, no authority or government has control over it. Despite the common belief, cryptocurrencies usage is much more extensive than a simple investing. It is also capable of our day-to-day transaction needs.
How does cryptocurrency payment processing work?
There are two major differences between traditional payment processing and cryptocurrency payment processing. First, a client pays via a digital wallet, not a credit card. Second, he/she pays in cryptocurrency, not in physical currencies like USD, AUD, etc.
What is a digital wallet?
To pay and accept crypto payments, one needs a digital wallet. It can be either an app or software. These wallets are much like bank accounts. The main difference is that they are decentralized. There are two main types of crypto wallets:
- Single currency wallets. These wallets link to a specific currency (aka Bitcoin). They fit best for individuals or inventors who work with a particular currency.
- Multi-currency wallets. Business owners prefer multi-currency crypto wallets as they offer a more comprehensive range of payment options.
How do the merchants get funds when offering crypto as a payment option?
Once a client pays in crypto, a merchant gets the funds in crypto as well. He/she can convert them to FIAT anytime. It can be done either with the help of a merchant’s PSP or a crypto-exchange agency.
What are the most popular types of cryptocurrency?
As for today, the most popular types of cryptocurrency are:
- Beta C (the official name of a Bitcoin). By the way, the most popular cryptocurrency in 2019. According to the research, 5.5% of all crypto owners use bitcoin.
- Ripple. The Ripple is the second most popular crypto globally. The same survey revealed that 1.8% of crypto owners prefer to use it as their payment methods.
- Litecoin. Last but not least, Litecoin has about $52 million in circulation. Moreover, it is expected to rise in the nearest future.
Pros of offering cryptocurrency as a payment method
Here is a list of the main benefits of implementing cryptocurrency as your payment option:
- No chargebacks. Yes, you’ve heard it right. Once the cryptocurrency payment is processed, neither chargebacks nor refunds are possible. That what makes crypto so attractive to high-risk business owners.
- Low fees. The transaction fees are surprisingly low when comparing to the credit card processing. In 2019, cryptocurrency transaction fees are the cheapest on the market.
- Rapidness. The entire process of crypto payment processing takes no longer than a few seconds. Merchant can exchange crypto to FIAT anytime he/she wants.
Cons of offering cryptocurrency as a payment method
After checking out all the benefits above, you might think that crypto is perfect. It is not entirely true. Take a look at the three disadvantages of offering crypto as a payment option:
- An absence of the E-wallet. The trend for crypto makes us think that such a tendency will change in the nearest future. However, as for today, the majority of clients don’t have digital wallets. Besides crypto, other popular alternative methods do not require wallets.
- Redirection on a payment page. Marketers hate redirection. We can’t blame them for that. They spent hours to attract clients to a website. Redirection might bring their effort to the naught. In the case of crypto payments, customers are inevitably redirected to their digital wallets, so to accomplish the payment.
- Fluctuation. There is no guarantee that you won’t lose on a swinge. The exchange rate of FIAT is not stable. The chances are, you might lose more when doing the payout of crypto in euro or dollars.
Check out the three most common mistakes merchants make when choosing payment methods to strengthen your chances for success.
List of documents to start accepting cryptocurrency payments
Once you’ve decided to offer crypto as your payment option, there are few steps to make. First, you need to contact your PSP directly and ask whether they have such an opportunity. If you don’t have a PSP yet, you need to find a trusted PSP and open a merchant account.
Here is a list of documents to open a merchant account and start accepting crypto:
- Certificate of incorporation. The paper shows the main aspects of company formation. It usually includes legal address, name, and type of the corporation.
- Certificate of incumbency (or equivalent). The document holds the information about the company’s owners – their names and positions they occupy.
- Passports’ copies of all company owners and officers with their signatures. The scanned copies of directors & officers’ passports.
- Application. Usually, it is an online form on a PSP’s website.
- The processing history. Different PSPs have different requirements. However, high-risk business owners always need to provide at least six months of processing history.
- License. Attach a license issued by your country’s responsible body.
- Turnover. Clarify your turnover amount so that the payment processor connects you to the most appropriate bank.
Though being an early mover is not an easy task, why to waste time? All the forward-thinking merchants are now implementing crypto as their payment method. Drop a line to get a free business consultation and find out whether your company will benefit from using cryptocurrency today.