In recent years, digital currency payments have become a powerful tool for businesses. Cryptocurrency allows reaching new customers, increasing revenues, and streamlining operations. In 2024, 562 million people worldwide own cryptocurrencies. A growing number of people (and businesses) are turning to cryptocurrencies as a simpler, more convenient, and safer means of transaction.
Whether you are a new entrepreneur or an established business looking to expand your payment options and stay ahead of industry trends, this guide is your go-to resource for navigating the world of digital payments effectively.
Pioneering Cryptocurrency Businesses
Among the early adopters of this technology are companies from various sectors. Notably, those in e-commerce, B2B, payroll, and PSPs (payment service providers). All these professional groups use cryptography as a more efficient means of settling their payments, including internationally. Other sectors, such as hospitality and retail, have also begun accepting cryptocurrency to meet the demand for digital currency payments from a growing segment of their customers.
Despite the advantages offered by crypto payments, the main challenge for many businesses is that it is generally a complicated process. Not to mention that the value of cryptocurrencies can vary significantly from day to day, making holding, exchanging, and converting cryptocurrencies less attractive.
Demystifying Cryptocurrency Payments
Since the first use of Bitcoin in 2009, cryptocurrencies have taken the world by storm, transforming how we think about money and transactions. Their decentralized nature and focus on peer-to-peer payments allow everyone to access, use, and benefit from this new financial system. It’s easy to see why cryptocurrencies have become so popular.
65% of consumers state they would like to make payments in digital currencies, and 55 % say they prefer an online store that accepts cryptocurrency payments over one that doesn’t.
For businesses looking to increase sales, attract new customers, and stay ahead of the competition, the trend is clear. Accepting cryptocurrency payments offers a strong alternative for business growth. However, given the traditional volatility of cryptocurrency markets, many businesses shy away from this opportunity, losing revenue and customers as a result.
Understanding Crypto Payments
Before explaining how your business can start accepting cryptocurrency payments, it’s worth taking a moment to understand exactly how cryptocurrency payments work and why they are gaining traction in the payment landscape.
How Do Crypto Payments Work ?
Crypto payments are processed using blockchain technology. The blockchain is a distributed ledger that records every transaction made between users (i.e., individuals or businesses).
It is operated by a network of « nodes » representing individual computers that keep a copy of the entire blockchain and play a crucial role in validating transactions. This network means that the blockchain is transparent and immutable. Once a transaction is completed, it cannot be reversed or altered in any way.
Payments are typically made between cryptocurrency « wallets » belonging to users and businesses.
What Are the Different Types of Cryptocurrency « Wallets » ?
To make cryptocurrency payments, users have a crypto wallet that is a combination of a private key and a public address. You can consider the public address like a bank account number and the private key like a PIN code that gives the user access to their cryptocurrency.
When it comes to choosing a wallet, the main elements to consider are ease of use, security, and control. The table below outlines the main types of cryptocurrency wallets (custodial and non-custodial), their advantages, and their disadvantages.
Being wallet-independent ensures that your business can cater to a wide range of customers, maximizing the benefits of crypto payments.
What Are the Different Types of Cryptocurrencies ?
Cryptocurrencies can be classified into different types based on their functions, characteristics, and underlying technologies.
The categories listed in the image above are not exhaustive and are rather meant to highlight the many distinct features of cryptocurrencies. As the blockchain space evolves, new hybrid tokens may emerge.
Another concept worth mentioning is central bank digital currencies (CBDCs). CBDCs are digital currencies that aim to provide a digital representation of a country’s fiat currency. These currencies are issued by central banks, although their deployment and adoption in real life are still in their early stages.
In the current market, the most prized cryptocurrencies by consumers are generally stablecoins like Tether (USDT) and USD Coin (USDC), or well-known tokens like Bitcoin (BTC) and Ethereum (ETH). In May 2024, Bitcoin (BTC) represented 53% of the total cryptocurrency market capitalization, amounting to an impressive 1.38 billion USD. Meanwhile, Ethereum’s (ETH) market capitalization stands at 449 billion USD, while Tether (USDT) and USD Coin (USDC), two leading stablecoins known for their price stability, have market capitalizations of 111 billion USD and 33 billion USD, respectively.
What Are the Benefits of Accepting Cryptocurrencies ?
Cryptocurrency payments are fast, secure, and cost-effective, offering numerous additional benefits for your business and customers. Cryptocurrency payments complement existing payment methods, enabling businesses to access different customer segments characterized by their unique preferences, such as the importance of security aspects provided by cryptocurrencies or greater trust in decentralized payment systems.
They also open up opportunities for increased customer spending, with 43 % of surveyed consumers stating they would spend more online if they could pay in cryptocurrencies. In the coming years, this popularity will continue to grow, making the integration of cryptocurrency payments a « must-have » for many businesses.
The Benefits of Accepting Crypto Payments via a Payment Gateway
While cryptocurrency payments offer distinct advantages over traditional methods, they also raise relevant underlying concerns for businesses.
- Security : Managing crypto assets requires stringent security measures, including secure wallet management, protection against hacking attempts, and private key protection. Implementing these security best practices can be challenging and time-consuming for merchants or businesses.
- Compliance : Accepting cryptocurrency payments as a merchant involves complying with complex regulatory requirements and ensuring adherence to anti-money laundering (AML) and Know Your Customer (KYC) regulations. Failure to comply with these compliance standards can result in legal consequences and damage to reputation.
- Volatility : Cryptocurrencies are known for their price volatility. Although stablecoins can help mitigate this issue, many merchants prefer to avoid the potential value fluctuations of cryptocurrencies like Bitcoin and Ethereum, as they can affect revenues and profitability. Therefore, it is essential to use a reliable crypto payment gateway that can instantly convert cryptocurrencies into fiat currency.
- Finances : Managing accounting for crypto transactions can be complex, especially considering the need to track conversions, transaction fees, and tax implications as well as other fiduciary transactions.
Streamlining the Crypto Payment Process
To overcome these challenges and streamline the acceptance of cryptocurrency payments, many businesses opt for payment gateway services. Using a payment gateway eliminates drawbacks such as volatility and security issues associated with a cryptocurrency wallet. While providing businesses with access to all the advantages of accepting cryptocurrency payments.
Payment gateways ensure that cryptocurrency payments are as risk-free and secure as possible for businesses. This includes making digital currency payments refundable at the discretion of the business or merchant, as well as basing refunds on fiat value to avoid volatility.
Customizing the Payment Experience
Through white-label API solutions, businesses also have the option to customize the payment form configuration. Thus, they can choose how the form will appear across all consumer-facing channels (e.g., websites, and applications). This allows tailoring the payment experience to your brand, creating a lasting impression, and contributing to an overall positive user experience. This includes adding company logos and personalized messages to the payment interface for a cohesive and engaging user experience.
Enjoying the Benefits of Cryptography Safely and Responsibly
Given the constantly evolving regulatory landscape surrounding cryptocurrencies, it is essential to ensure a secure experience for both your customers and your business. If you collaborate with an intermediary platform, make sure it complies with the following regulatory practices:
- FATF Rule – AML/CFT Compliance – to ensure adherence to its AML/CFT (anti-money laundering and counter-financing of terrorism) obligations.
- Sanctions List Verification – Conduct checks in databases such as those of the Office of Foreign Assets Control (OFAC), politically exposed persons (PEP), and other relevant regulatory lists.
