Are Bitcoin Payment Services Similar to Credit Cards?

Bitcoin is the most popular cryptocurrency with a market cap above $700 billion. It is also one of the safest, privacy-friendly ways to make online transactions - and if you follow basic safety rules, your Bitcoin wallet will never be hacked. However, BTC is far from the only crypto that you can use for everyday transactions: popular examples include ETH, DOGE, and LTC.

As the overall amount of Bitcoin transactions increases, companies that operate within the fiat-based economic system are starting to accept cryptocurrencies. This process is helped by the global spread of crypto payment services and gateways. Crypto is commonly used by customers that value privacy and safety of their funds.

Thanks to the modern crypto payment processors, paying with BTC has become much easier than it was years ago. Some gateways even support instant transactions in online shops and physical points of sale.

In this article, we explain how modern Bitcoin payment processors work, the advantages of crypto payments, and the differences between traditional fiat payments and cryptocurrency payment systems.

Bitcoin payment services serve the same purpose as other forms of payment

While standard fiat gateways interact with banks, cryptocurrency payment systems interact with blockchains. When you send Bitcoin from your wallet, the transaction appears on the blockchain and is eventually confirmed by miners.

Let's look at the most common example: visiting a supermarket and using a debit or credit card to make a payment. After entering the PIN, you send money from your bank account to another bank account. Even though all the transactions are processed automatically, they remain in a centralized network and can be blocked by the bank - in fact, your card itself can be blocked.

In decentralized payment systems, transactions are confirmed by miners in a decentralized fashion, and nobody can block or freeze your wallet or payment. On the customer's end, this extra degree of security doesn't mean a more complicated payment process. In fact, in terms of user experience, BTC payments work the same way as card payments: pick an item and hit the "Pay with BTC" button (or something similar). In response, the payment window will display an address that you can use to send your BTC to. The best processors, such as CoinsPaid, also provide a convenient link and a QR code that you can click on or scan with your phone to open up the blockchain wallet with prefilled payment data (address and amount).

Cryptocurrency payment gateways provide businesses and companies with a two-layer solution that helps them receive crypto payments, convert that crypto into fiat, and withdraw it to a bank account. Once a company decides to accept Bitcoin payments, it needs to integrate a payment gateway or install a crypto plugin if using an eCommerce platform like WooCommerce.

In addition to online processing, some payment gateways provide offline businesses with POS (Points Of Sale) solutions that allow brick-and-mortar merchants to receive payments in crypto from clients who have mobile wallets.

We should also mention recurring crypto payments - a relatively new but very promising service that allows merchants to bill customers on a regular basis. So far the only processor to have implemented it is CoinsPaid, and it will be interesting to see if others will follow suit.

Finally, merchants can implement more advanced technical solutions via an API - for example, to receive BTC payments in an app rather than a website.

Once the customer sends BTC to the provided address, the payment gateway confirms the transaction and gives a signal to the merchant to complete the purchase on their end. When digital currency is deposited in the merchant's account with the processing system, it can be converted into fiat currency to eliminate volatility risks. All this is done automatically and in a matter of seconds for many cryptos.

Of course, a merchant can also decide not to convert crypto into fiat and store it in their account for a while or move it to an external blockchain wallet. Alternatively, the merchant can request a withdrawal (settlement) to a specified bank account in USD, euro, or another fiat currency.

Sometimes merchants mistakenly believe that they can handle crypto payments on their own - either by using a regular blockchain wallet or by developing a new processing solution from scratch. However, once crypto transaction volume hits thousands or dozens of thousands of dollars, managing it on one's own becomes a technical and accounting nightmare.

Even though it may sound like it's hard to start to accept Bitcoin payments, it's not true. In addition to that, sometimes it can be easier than getting a business account with a bank to receive fiat payments. Cryptocurrency payment gateways allow you to tap into a new audience and boost revenue while saving both money and time.