Along with implementing blockchain technology in various fields of daily life, such as academics, health, supply chain, etc., payment processors are also developing simultaneously. Crypto payment methods allow merchants to use crypto as a daily payment method. Many businesses are using payment methods in crypto instead of traditional fiat currencies.
As this method is more convenient and straightforward to be adopted because it does not require a digital wallet or conversion of digital money to fiat, it is gaining more popularity. Moreover, it makes it simpler for merchants to accept crypto payments and facilitates them to get a broad range of crypto assets.
This guide article will elaborate on crypto payment methods and how they work. In addition, it will also explain the pros and cons of using crypto payment methods to the readers.
What is a Cryptocurrency Payment Gateway?
The process and receiving processes of cryptocurrency payments have been made easier for traders using crypto payment gateways such as Coinbase Commerce handle, PayPal or BitPay, etc. The businesses, in return, get fiat currency in their account. Therefore, the uncertainty regarding cryptocurrencies can be removed by providing multiple other payment options to the customers.
Crypto payment processors do not always need to receive digital currency. Traders can also use their personal wallets to accept cryptocurrencies. However, the payment procedure is made more convenient by using crypto payment gateways as transactions can be settled in real-time, and crypto payments can also be made in addition to traditional currency.
Types of Crypto Payment Gateways
There are two types of crypto payment gateways that are mentioned below
- Custodial Crypto Payment Gateways
In these types of payment gateways, the profit that the traders earn is added to the accounts. After this point, the trader can withdraw the funds into their wallets.
- Noncustodial Digital Currency Payment Gateways
In this type of payment gateway, the payment is just processed, and the profit earned is then transferred to the wallets of the merchant.
Why are Crypto Payment Gateways Needed?
Various reasons make the integration of crypto payment gateways mandatory in multiple ways. Firstly, blockchain technology provides transparency and security to the system making it safer for users. Moreover, compared with traditional fiat currencies, the transactions being carried out with crypto payment gateways are relatively much cheaper.
These transactions occur within no time, saving the effort and time of the customers. In addition, crypto payment gateways simplify the transaction processes by sorting out all funds and conversions.
Main Features of Crypto Payment Gateways
Although businesses can customize the features and characteristics of crypto payment gateways according to their needs, some of the essential elements of the crypto payment gateways are mentioned below.
- Peer-to-peer Transactions
The decentralized payment gateways can be integrated into the existing payment models to create a peer-to-peer system. It facilitates businesses, retailers, and merchants to get direct payments from their customers. In addition, this feature also helps the customers to access the payment gateway safely and also increases the transaction speed.
- No Intermediaries
Using payment gateways for making payments eliminates the involvement of any mediating body or third party. It also reduces the transaction charges as the payment directly goes from the customer’s wallet to the merchant without any central gateway.
- Easy Integration
Crypto payment gateways can be integrated into any application quickly, being a convenient payment method. The traders can immediately start accepting payments in crypto by involving the feature in their existing payment systems.
- Cross-Border Transactions
Using the crypto payment gateways, one can transfer currency within a few minutes compared to the traditional payment methods that usually require about 5 to 15 days for completion. Moreover, it also facilitates the import and export of all kinds of businesses, whether small-scale, medium, or large, to complete their payments.
- Real-time Exchange
The value of cryptocurrencies can fluctuate quickly because of the volatile nature of the market. Therefore, the users can use the real-time exchange feature to convert their crypto coins into fiat currency using crypto payment gateways in such situations. Moreover, the upgraded systems of some of the crypto payment gateways use plenty of market information and price charts in the same platform.
- OS Compatibility
Any operating system can be integrated with the crypto payment gateways, whether it be Windows, iOS, or Android. There is no need for configuration or application specifications for the devices to use the payment gateways.
- Donation Facility
Because of the increasing popularity of crypto assets among the masses, many renowned non-profit organizations have started accepting donations in cryptocurrencies. A few of these organizations are the American red cross or UNICEF etc.
This makes it mandatory for the crypto payment gateways to provide the option of donations in crypto. Moreover, the person donating should also be able to access information such as the QR code, list of currencies or wallet address, etc.
- Auto Settlement Property
To convert cryptocurrencies into traditional fiat currencies, stablecoins, or other fiat currencies, etc., the crypto payment gateways can be connected directly with the exchanges. It can be done by using an auto settlement option available. Some prominent crypto exchange platforms, such as Bittrex and Binance, offer this facility to exchange coins with USDC, USDT, TUSD, USD, etc., by simple integration of payment gateways.
What is Fiat Payment Gateway?
While, on the other hand, a fiat payment gateway links an appropriate payment system and a bank account. This payment gateway only accepts traditional currencies such as Euro, US Dollars, etc., and cannot convert fiat to cryptocurrencies. One can approve or reject their bank cards and electronic wallet payments that are based on the bank card details of the customer using fiat payment gateways
Difference Between Crypto Payment Gateway and Fiat Payment Gateway
Some of the differences between crypto payment gateways and fiat payment gateways are explained below.
- Number of Mediators
The number of mediating bodies involved in the case of a crypto payment gateway is only one, while in the fiat payment gateway, three or more mediators can be involved.
- Payment Timeline
The payment is to be processed within one second to ten days while dealing with a crypto payment gateway. On the contrary, a fiat payment gateway may take one second to almost 14 days.
- Charges
In the case of a crypto payment gateway, the charges are usually low compared to a fiat payment gateway, where the fees charged are relatively high.
- Chargeback Fraud
There are limited or no chargeback frauds while dealing with crypto payment gateways, while there is a significant risk of chargeback fraud while dealing with fiat payment gateways.
Working of Crypto Payment Gateways
If the businesses are not entirely ready to enter the crypto space yet want a demanding form of payment, they can use crypto payment gateways. However, to make customers stay longer, they may charge a service fee from them. In addition, if the miners or transaction validators demand a fee for transactions, the providers may also ask for additional charges. The complete working process of crypto payment gateways is elaborated below.
- First, the customer has to choose the option of crypto payment gateways to pay in cryptocurrency after selecting any goods or products online or in-store.
- After that, the customer will be locked in a transaction window. During this time, the rates of the cryptocurrency they want to pay and the fiat currency they prefer will also be locked.
- Next, the crypto payment gateway instantly converts the cryptocurrency into fiat currency opted for by the customer.
- The funds are then transferred to the trader’s account, and he can withdraw them at any point or use them for other purposes.
Types of Cryptocurrency Payment Gateways
Several different currencies can be stored in the wallet, depending on the need. A crypto payment gateway provides various payment options to users using crypto holdings. At present, businesses are using two different kinds of crypto gateways which are discussed below.
- Crypto Payment Gateway DeFi
Users can control their funds using the DeFi crypto payment gateway using private keys. These gateways are integrated with absolute security providing feasibility to the users. DeFi crypto gateways are non-custodial. It allows the user to enjoy a transparent environment without any involvement of a third party in the whole transaction procedure.
- Gateway with Multiple Crypto Transactions
As indicated by the name, multiple crypto transactions gateway allows the users to make payments in different crypto options and the merchants to accept payments in numerous crypto options. This method is usually adopted by traders who carry out trade in all parts of the world and accept payments worldwide. Moreover, it also permits them to carry out business without a network fee.
In addition, like all other payment gateways and wallets based on the blockchain network, the multiple crypto payment gateways also eliminate the role of any intermediate party from the network.
Ways to Use Crypto Payment Gateways
Using the crypto payment gateways has been made easier by providing ease of customization to the users. However, the crypto payment gateways can be accessed using the following services.
- Mobile Applications
As per the needs of any business or company, a relevant and secure mobile application can be designed; the mobile app performs the same function as any software operated on the desktop web to make payments. The users can conveniently log into their accounts using the mobile application and accept payments.
Moreover, they can also use it for converting crypto into any other currency or fiat. The application requires the correct login details to function correctly.
- Crypto Wallet Development
A secure crypto wallet can be used to access their accounts easily. They can easily monitor the market rates of existing crypto coins, save their currency, and conveniently check their account balance. Moreover, the user can instantly send or receive several crypto payments by correctly integrating this wallet into the crypto payment gateway.
- Multiple Payment Options
Without any dependence on payment mediums, different crypto payment gateways have been developed to convert crypto into fiat currencies. The users can use any crypto coins, wire transfers, debit cards or credit cards, etc.
- API Plug-Ins
Several unique and customized application programming interfaces (APIs) have been developed to automate payment methods. These APIs can also be used to manage customer non-payment services and look after payments and transactions.
- Multiple Currency Exchanges
Customers are provided with a decentralized crypto payment gateway to deal with several cryptocurrencies. The users can accept their payment in any currency they want using these gateways, whether it be Bitcoin, ADA, Ether, AVAX, or any other.
Pros and Cons of Crypto Payment Gateways
Some of the main advantages of using crypto payment gateways are carrying out transactions immediately. Therefore, providers and customers must pay lower transaction charges and service fees. The overall customer experience is also improved due to the involvement of only one medium body, the crypto payment processor.
In addition, the blockchain network provides transparency to the system, protecting them against chargeback frauds. On the other hand, there may be a situation where the merchants do not receive the payment after being transferred from the customer’s card using a fiat payment gateway. Moreover, the volatility risk of the crypto market is also reduced as the digital currency payment gateways support multiple types of cryptocurrencies.
The crypto payment gateways act as an intermediate entity between traders and customers; therefore, one cannot call the trade between the two completely decentralized. Moreover, the merchants may get affected if there is a system bug. It may delay payments until the service provider fixes the crypto payment gateway.
Making payments directly on the blockchain is a relatively cheaper process than using the crypto payment gateways, as they act as a mediator between the trader and the customer. Therefore, the provider himself pays the transaction fee required to make any payment on the blockchain network.
Moreover, the crypto payment gateways may be considered centralized entities that ask the merchants to show some level of trust so that they can receive a secure, reliable, and high-quality service that can easily tackle any scam or fraud.
Do Coinbase and Binance have a Payment Gateway?
The centralized crypto exchanges known as Binance and Coinbase provide the opportunity of crypto payment gateways to their customers. Moreover, by using the application programming interfaces (APIs) offered by both platforms, the checkout pages can be created by the merchants themselves using the design control method.
The application programming interfaces are the intermediate bodies operating through software, allowing two applications to communicate. For the companies accepting crypto payments, Binance offers a Binance payment option. The merchants can set up the Binance pay option at their stores by displaying their unique QR codes. This provides a secure and contactless crypto payment method to the users.
Moreover, consumers can be provided with more payment options if the retailers integrate Binance Pay into their online stores for permissionless transactions. To accept payments in cryptocurrencies, the Merchant account facility has also been provided by Binance Pay Merchant Program. In addition, channel partners can also be used by businesses to receive crypto payments via Binance Pay.
Coinbase Commerce, the crypto payment gateway of Coinbase, accepts about ten different cryptocurrencies. These cryptocurrencies may include Bitcoin, Bitcoin Cash, Ether, Tether, Dogecoin, USD Coin, Litecoin, ApeCoin, Dai, and Shiba Inu. Coinbase Commerce automatically converts the payments into USD.
However, the funds that are received by the merchants cannot be accessed by Coinbase. This means that if the customer loses the seed phrase composed of 12 words, the platform cannot recover the funds. In addition, Coinbase also charges a 1% transaction fee for receiving payments in crypto before transferring funds to the trader’s account.
Is It Safe to Use Crypto Payment Gateways?
It is essential for the customers to take into consideration how the merchants store cryptocurrencies and other fiat currencies before finalizing any crypto payment gateway. Moreover, the transaction charges, history of fraud, and scams tackled by the platform and the cryptocurrencies it supports are other essential features to be noticed.
In addition, another very vital feature to be looked upon is the customer support service provided by the platform. It is essential to get a timely solution to any problem if there is a disturbance in the network. While looking for crypto payment processors, verifying every customer’s reputation is also essential. Therefore, it is advised for the customers to read the reviews and ratings of different service providers before finalizing one.
Conclusion
Decentralization of trading processes is one of the main aims of cryptocurrencies. However, it may not be acceptable to everyone. Cryptocurrency is still a new concept, and the world is slowly and gradually adopting it. Therefore, it is natural to be curious about any new idea, especially one that involves finances and money.
Although it is not necessary to use crypto payment gateways for transactions, they help reduce much of the frustration, disinformation, and confusion that usually arise from using centralized means of payment. Nowadays, all huge organizations are thinking of integrating crypto payment gateways into their payment systems because of the transparency and security they provide to the network being based on the blockchain network.
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