Crypto payment gateways allow businesses to accept payments in the form of cryptocurrency. They offer alternative payment options, enabling users to immediately receive digital payments and fiat currency. For businesses where money is exchanged for goods or services and accept major credit cards as a payment method for customers, crypto payment gateway traders allow vendors to accept payments in the form of a variety of cryptocurrencies on their website the same way they would a credit card or bank transfer.
It is important to note that digital currency payment gateways are not required, as using your wallet to accept cryptocurrency payments is perfectly acceptable. However, gateways go the extra mile of exchanging cryptocurrency and handling a wallet out of your hands. There are two types of crypto payment gateways: custodial and non-custodial. Profit made by merchants via custodial crypto payment gateways is placed into their accounts, where they can start withdrawing funds to their wallets. Non-custodial crypto payment gateways only process the payment and quickly transfer the profit to the merchant’s wallet. The Bank account and the appropriate payment system are linked through a fiat payment gateway, which is restricted to accepting only national currencies and does not serve as a fiat-to-crypto payment gateway. Based on the customer’s bank card details, fiat payment gateways approve or reject bank card and electronic wallet payments.
How does a crypto payment gateway work?
Payment gateways are firms that take on the perceived risk of cryptocurrency payments by using their wallets to facilitate transactions between merchants and their customers. There are a variety of roles that crypto payment gateways can function in. Experts at Bitcoineer explain that the principal function is to allow customers to pay for goods and services using cryptocurrency. For instance, if you want customers to pay in Bitcoin, or they have this as their preferred method of payment, a gateway payment can be used to accept Bitcoin in exchange for goods and services. Crypto payment gateways may create a wallet to store the coins you accept or connect to an existing wallet you already use, allowing you to change between different fiat and cryptocurrencies after receiving the payment.
Steps followed for payment flow:
- Customers pay an amount equivalent to the digital currency’s fair market value at the time of the transaction when they opt to make payment in cryptocurrency at checkout.
- The cryptocurrency gateway payment service instantly converts the payment into your chosen currency.
- The account provider adds the money into your account according to your service contract for withdrawal.
The payment flow is transparent because it eliminates stress, as the cryptocurrency service provider will deposit the appropriate funds into your account. Cryptocurrency gateways can operate from anywhere in the world, so one should check their country’s cryptocurrency regulations before setting up an account. Suppose a provider is designed with a payment system and one uses the cryptocurrency wallet to facilitate the transfer — in this case, they will incur fees charged by the currency network’s transaction validators because validators verify blocks and transactions in the blockchain. Providers charge their service fees to continue operating and offering their services.
If a user wants to convert between cryptocurrencies and local currency, it is essential to select a provider that supports the cryptocurrency they prefer, and it is critical to choose one that best serves the business. It is crucial to select one with the lowest fees for your business, as transaction fees can fluctuate between crypto gateways.
Advantages and Disadvantages of Crypto Payment Gateways
Cryptocurrencies are designed to be decentralised and anonymous, which makes it easy for two parties to make an exchange. Understanding the difference between the advantages and disadvantages of crypto payment gateways is essential so one can decide how best to accept digital currency payments.
Advantages of crypto payment gateways
- A payment gateway maintains customer preference while removing the anonymity of who’s being dealt with
- Instant transaction settlements with low-cost network fees
- If there are payment issues, support is available
- Users are protected against chargeback fraud and can accept payments from anywhere
Disadvantages of crypto payment gateway
- Cryptocurrency is designed to bypass and work as a third party
- For uninterrupted services, one has to rely on the provider’s ability
- Small transactional fees must be paid when using a cryptocurrency wallet
- If the payment gateway gets hacked, merchants can also lose their funds
- Crypto payment gateway is more expensive compared to making direct payments on the blockchain
Cryptocurrency payment gateways remove anxiety, confusion, disinformation, and speculation that can come from a decentralised and unregulated source of value. If users want to accept cryptocurrency as payment, they need to learn about cryptocurrency payment gateway. There are many crypto payment gateways to choose from, and it is essential to research to find out which one best suits your needs. It is advisable to do your due diligence on how service providers store cryptocurrencies and, afterwards, fiat payments. This article is informative and should not be used as legal advice.