All financial institutions that process credit card transactions are referred to as "merchant services." Crypto merchant services are often used as an alternative for merchants who are displeased with their current merchant services provider.
One type of merchant service that has recently gained prominence is cryptocurrency merchant services, which allow companies and individuals to accept crypto like Bitcoin as payment. This article details what cryptocurrency merchant service providers offer, how they compare with traditional payment options, and how they might be a good fit for some merchants.
How do cryptocurrency merchant services work?
Cryptocurrency merchant services, as the name implies, work exclusively with cryptocurrencies. Most services accept a wide array of cryptocurrencies, although some merchants might have specific preferences for which ones they'd like to collect payment in.
The process for accepting cryptocurrency payments is similar to accepting card payments. Some limitations apply based on the service provider and what types of cryptocurrencies they accept. Some providers will only receive Bitcoin payments, whereas others are more open to Ethereum and others.
What are crypto payment gateways?
A cryptocurrency payment gateway is a service that accepts crypto and converts it to fiat (government-issued currency like the U.S. dollar). This allows merchants to receive their funds in a more familiar form, which they can then exchange for local currency if they choose. There are multiple types of crypto payment gateways.
What are some of the cryptocurrency payment platforms? Solutions like Coinbase Commerce and BitPay provide a payment gateway for cryptocurrency for businesses and individuals to accept crypto. These types of providers allow merchants to link their wallets with their accounts, which will then receive payments in that wallet's designated currency. Most providers will only accept Bitcoin as payment at present. However, as crypto continues to get mass adoption, more providers will accept other cryptocurrencies.
A cryptocurrency merchant services provider would generate a unique address that is used to receive payment throughout the checkout process. A QR code and wallet address are often generated containing all the relevant information needed for a purchase. Customers would scan this QR code and send the exact amount of coins required by the business owner.
What are the benefits of crypto merchant services?
There are quite a few benefits of using merchant services for a business. The largest advantage is the cost savings over other payment types, mainly if you process high volumes.
Other advantages to cryptocurrency merchant services include lower limitations on charge amounts (which may be set by the service provider instead of your credit card issuer) and no restrictions on processing international transactions. These benefits make cryptocurrency merchant services popular among e-commerce merchants.
In what ways do cryptocurrency merchant services compare to traditional payment options?
One of the most significant benefits of using cryptocurrency as a payment method is that it's much cheaper than card payments. A transaction fee is usually levied on each charge and charged in the same currency (e.g., you would be charged fees in Bitcoin if you received Bitcoin payments).
The main drawback is that crypto transactions are irreversible by design, so they can't be canceled like credit card charges. However, this also means there's no possibility of chargeback fraud.
Who can use cryptocurrency merchant services?
Cryptocurrency merchant services are typically best for e-commerce merchants that sell products or digital merchandise. They're also suitable options for businesses that accept international payments. If a company is ready to accept Bitcoin as payment, this eliminates the hassle of converting various currencies.
Does cryptocurrency make sense for my business or organization?
This depends on your specific business, how much you usually charge for purchases, and what types of cryptocurrencies you want to accept. There aren't many brick-and-mortar stores that accept cryptocurrencies unless they're dedicated cryptocurrency businesses. The main exception is locations that happen to be near college campuses or other hubs for cryptocurrencies.
If your business is heavily international and accepts larger transaction volumes, cryptocurrency merchant services might be your best option.
Accepting cryptocurrencies makes it easy to collect donations for nonprofit organizations, especially if you don't charge transaction fees on the contributions. This allows you to avoid charging donor cards extra fees or attempting to convert fiat currency into acceptable denominations at short notice (like cash).
Before jumping into accepting cryptocurrency as a payment method, be sure to check with your accountant or business adviser. Bear in mind that the value of cryptocurrencies may change quickly. This can make pricing difficult if you're trying to pass on cost savings through lower prices at the point of sale.
Time will tell how cryptocurrencies will hold up against other alternative payment methods. For the moment, it's clear that cryptocurrency merchant services are an attractive option for businesses that meet specific criteria.
