Over the past few years, crypto adoption has seen tremendous growth. This is evident as top multinational companies now offer crypto payment options to their customers.
For instance, in 2023 alone, top brands like Starbucks, Balenciaga, Tag Heuer, Microsoft, Ferrari etc., started accepting crypto payments. One key technology responsible for this transition is the crypto payment gateway.
A cryptocurrency payment gateway is a digital currency or cryptocurrency processing application that works similarly to traditional payment processors, gateways, and bank credit cards.
It acts like a payment system that helps cryptocurrency traders carry out financial payments from diverse cryptocurrencies without compromising on safety.
Although conventional payment systems are effective in many ways, they have significant limitations, such as delays in cross-border transactions, very little automation, and the involvement of intermediaries.
Businesses around the world have now recognized these setbacks of traditional payment gateways.
Businesses willing to accept crypto as a payment method usually have to use the crypto payment gateways.
Cryptocurrency gateways facilitate merchants to accept digital payments and receive their preferred currency instantly in return. So, these gateways act as the intermediaries between the consumer and the merchant.
How Do Cryptocurrency Payment Gateways Work?
Understanding how payment gateways work is not that difficult if someone understands how the traditional payment gateways work.
Debit or credit cards of traditional gateways are replaced by a digital wallet through which the merchant receives the crypto payments by opening a merchant account on the other end. The transactions occur in a decentralized manner and include a lot of automation.
The wallet address is the critical factor that is necessary for the success of transactions.
We can also see the working in light of the following steps:
Step 1: The customer opts to make his payment using cryptocurrency on the page of check-out (through a crypto payment gateway)
Step 2: The payment is made in terms of the current market value of the crypto token with which the consumer makes the payment.
Step 3: The payment gateway instantly converts the payment into the preferred currency.
Step 4: The money is then finally held with the provider and then deposited to the merchant’s bank account.
A notable feature of crypto payment gateways is that they offer almost instant borderless transactions. The crypto payment gateways help to maintain the transparency of the transactions.
Any merchant residing anywhere can receive payment from any consumer from any country without the hassle of going through a bank transfer requiring high conversion charges.
The transaction details are also preserved in the blockchain’s ledger if the payment gateways are on-chain gateways.
Pros of Cryptocurrency Payment Gateways
- They make borderless transactions super smooth and hassle-free.
- The transaction fees are very low compared to other modes.
- Cryptocurrency payment gateways use various security measures like SSL, 2-factor authentication, etc., to ensure secure payments.
- Very few intermediaries are involved in such payment, lowering the commissions.
- Cryptocurrencies, by their nature, are meant to be anonymous. These payment gateways help to maintain the anonymity of consumers.
Cons of Cryptocurrency Payment Gateways
- The cryptocurrency industry is still very unregulated, which raises a question of trust and security.
- The volatility of the crypto market itself creates uncertainty about the value of the cryptocurrency using which the payment is made.
- The payment procedure is quite complex.
- The number of platforms that accept this form of payment is deficient.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.