Differences Between Bitcoin Payment Processing Providers

Bitcoin once again rules the mass media. Articles on bitcoin have been popping up in major financial media outlets – CNBC, Wall Street Journal, Financial Times, and Bloomberg. The users’ interest in the first cryptocurrency is nearing a new all-time high, according to Google Trends.

In the light of growing interest in digital assets, companies that offer services or goods start to think whether they need to start accepting payments in cryptocurrencies and which crypto processing services are most suitable for their business goals.

In the light of growing interest in digital assets, companies that offer services or goods start to think about whether they need to start accepting payments in cryptocurrencies

(Source: Google Trends for the keyword “bitcoin gateway” queries)

In the past few years, the crypto processing industry was given a major boost by the growing interest in digital assets from big e-commerce and IT companies.

The market is filled with dozens of services that allow online shops and other points of sales to accept crypto payments. However, each processing operator has its own set of advantages, but also limitations.

We explored in detail the offers provided by leading bitcoin processing services and examined what a merchant needs to know when deciding to accept payment in bitcoins.

Automatic conversion to fiat 

While the interest in cryptocurrencies has grown not only among regular users but also among institutional investors, they are still less popular than other conventional payment methods – bank transfers and regular bank cards charged up with fiat currencies like EUR, USD, GBP, etc.

In economic affairs, fiat is still a king. Therefore, shops and other points of sale have to build up the price of goods and services by taking into account the prime cost in fiat currencies.

The high volatility of cryptocurrencies that attracts investors is more of a weakness in the view of merchants. Let’s assume an online shop that sells something for $100 and accepts cryptocurrency as a means of payment.

At the moment of sale, the shop receives crypto for a sum equivalent to $100 into its account. The next day, the exchange rate goes down and the shop’s revenue is now lower than was earlier expected.

To help merchants to mitigate risks associated with the high volatility of cryptocurrencies, the majority of cryptocurrency processing services offer a service of automatic conversion to fiat and transfer to the company’s account at a regular bank.

In this case, a merchant immediately receives the desired sum in a chosen fiat currency. In practice, a merchant does not work directly with cryptocurrencies.

But the majority is not without exceptions. For example, a payment gateway Coinbase Commerce launched in 2018 and focused on the US market does not allow instant and automatic conversions.

To exchange cryptocurrency to fiat, a merchant needs to transfer the received crypto to the exchange account within the Coinbase ecosystem, close the deal to exchange it to US dollars, and only then can they withdraw funds to the bank account of the company.

The list of accepted cryptocurrencies

Bitcoin is the most popular cryptocurrency in the world, but by no means it is the only cryptocurrency. During the past decade, the market was filled with thousands of digital coins. Some have already found their niche in the market and solidified their position with their target audience.

Taking into consideration the variety of digital coins, crypto processing services expand their lists of accepted cryptocurrencies to satisfy the need of the bigger share of potential customers.

This being said, only a few crypto gateways can boast about huge lists of supported cryptocurrencies. While American gateways like BitPay, one of the pioneers of the field, or Coinbase Commerce, support the main cryptocurrencies and stablecoins (BTC, ETH, USDC, etc.), their European competitors are less restricting about accepted coins.

For instance, Cryptoprocessing.com by Coinspaid supports more than 30 cryptocurrencies (BTC, BCH, LTC, ETH, ETC, XRP, NEO, ADA, DOGE, USDT etc) and ERC20 tokens, as well as executes an automatic conversion to 20 fiat currencies (EUR, USD, GBP etc). 

The most extensive list of accepted cryptocurrencies belongs to the crypto processing service Coinpayments that supports over 2000 digital coins. Though, admittedly, the majority of the transaction volume still consists of transactions in the main cryptocurrencies and stablecoins from the top-20 list on CoinMarketCap. 

Payment processing fees

The average crypto payment process fee is around 1%. Some processing services like Coinbase Commerce do not charge a processing fee (at least it is marketed as such in the handout to merchants). Instead, they charge for converting crypto to fiat, which is not done automatically at this service.

Other leading crypto processing companies, like Cryptoprocessing.com (CoinsPaid), BitPay, CoinGate, offer similar rates with a 1% commission per transaction.

Why choose a crypto payment gateway when any payment service or a bank partner charges the same commissions? The answer to this question is brought to light in the last, and, in our opinion, the most important section of this article.

Invoices and asynchronous payments 

There are two types of payments and both are equally popular among internet platforms.

The first is the payment by invoice and is often used by online shops or other points of sale that offer goods or services at a fixed price. The merchant needs a customer to transfer the amount that exactly reflects the price – not a dollar less or more – since the payments should match the issued invoices for reporting to tax authorities.

The second type of payment is the asynchronous deposit, which is used to charge up telecom or internet accounts for iGaming and betting platforms. In the case of an asynchronous deposit, the transfer sum is not limited by a seller. The payer determines how much he would like to charge off for the services.

By accepting such payments in crypto, sellers can save a lot on commission compared with conventional methods.

Bank commissions for asynchronous deposits are currently way higher than the crypto processing fees. For instance, the bank would charge an online gambling platform from 2%-4% to 10%-15%.

Regardless of licenses or permissions, payment systems like VISA or MasterCard rate these transactions as high-risk. By using crypto processing, gambling platforms can reduce the processing fee to 1%.

The leading crypto processing service for the iGaming industry is Cryptoprocessing by CoinsPaid. In 2020, they executed transactions in crypto for US$1 billion. The lion’s share of it is the operations on asynchronous deposits. Among crypto processing companies, Cryptoprocessing by CoinsPaid holds one of the leading positions by transaction volume.

Summary

Adding cryptocurrencies to the list of accepted means of payments allows businesses to broaden their user base, win the loyalty of those who want to pay online with cryptocurrencies, and significantly reduce costs for processing fees.

But a real difference will be seen not to all merchants. The biggest savings will be achieved by those sellers who work not with invoices but with asynchronous payments.