Cryptocurrency is probably the most divisive financial asset of the decade. Some, like the Microstrategy (NASDAQ:) CEO Michael Saylor or the founder of Twitter (NYSE:) Jack Dorsey, believe that can become a $100 trillion asset and ‘create world peace’. Others, like the billionaire investor and notable ’gold bug’ Peter Shiff, say that it’s ‘fool’s gold’ and ultimately useless.

But even within the crypto enthusiasts’ camp, there are strong divisions as to how crypto should be used. It is more profitable to invest in crypto and keep them until they reach a certain value. Or shoulyou rather use it as currency – that is, to pay for goods and services? After all, the mysterious BTC creator, Satoshi Nakamoto, entitled his White Paper ‘Bitcoin: A Peer-to-Peer Electronic Cash System’, and there are dozens of specialized processors offering crypto payment services, such as CoinsPaid and Coinbase (NASDAQ:) Commerce.

This debate reflects crypto’s peculiar dual nature: as an investment asset and as a currency. You can’t pay for a planet ticket with gold or stocks; but you can do it with Bitcoin.

You can pay using crypto instead of a bank account.

While the media are more focused on BTC investing, crypto is actively being used to pay for goods and services. From the end user’s point of view, there are two big advantages to paying with crypto:

1) Global acceptance. You can be pretty sure that your Bitcoin payment will be successfully processed, regardless of your and the store’s locations. However, it is possible to refuse a transaction using a bankcard if the payment provider uses another region. A Latin American website might reject a card issued by an Indian citizen.

2) Privacy and security. Users aren’t required to submit any personal or sensitive financial details when making a Bitcoin payment. Credit card data can be stolen and used for fraudulent transactions; but there’s nothing online criminals can do with a blockchain wallet address.

These benefits are increasingly being recognized by more people who switch to cryptocurrency for some or all of their online payments. According to Max Krupyshev, CEO of CoinsPaid, his company has already processed $ 2.3 billion euro worth of crypto payments in 2021 – twice more than in all of 2020.

Through a merchant’s eyes

In spite of end users’ interest in Bitcoin, thousands of online merchants wouldn’t offer crypto payments if it wasn’t also in their best interest. What do business get from it? Max Krupyshev explains:

“We’ve recently polled many of the 700+ merchants that use Cryptoprocessing by CoinsPaid to find out what they appreciate most about accepting crypto. The three most popular items were reduced cost, zero chargebacks, access to new customers, and accessibility.

Coin payments don’t involve acquiring fees. Online shoppers don’t realize how much of an online store’s revenue is spent on those fees, plus rolling reserves. Remove these – and you get 50-70% less in payment costs and a 10% bump in profits.

It is also a pain to have chargebacks. Every $100 merchant pays in chargebacks, it actually costs the merchant more than $200. This includes bank fees and wasted time. A BTC payment is not subject to chargebacks. The payer must initiate the Bitcoin payment.

Many crypto-users look online for businesses that can accept Bitcoin payments. For example, our own research shows that 57% of crypto holders who are also gamblers use exclusively Bitcoin casinos.”

Do crypto payments have their downsides? They do – and high blockchain mining fees are the most notable pain point. In mid-September 2021, the average mining fee for a Bitcoin payment was $3, while for it reached $50. What can a Bitcoin payment gateway do to change this situation? Max Krupyshev continues:

‘What CoinsPaid does is group transactions in such a way as to minimize gas fees. But this is our proprietary tech, and most other BTC business payment services don’t have anything of the sort – end users just have to pay whatever miners charge. On the other hand, we’ve managed to scrap gas fees for the merchants who accept Bitcoin as payment when they send transactions within or outside of our ecosystem.’

Of course, an alternative is to choose another cryptocurrency. CoinsPaid, a gateway that supports Bitcoin and ETH, also offers support for dozens more digital assets such as LTC or DOGE. Any number of currencies and tokens are available for merchants to seamlessly receive and integrate payments. According to Mark Cuban (billionaire), the vast majority of his users prefer to pay in DOGE to BTC. Crypto payments will likely become more diverse as a result.

For a merchant using secure payment services offered by a company like CoinsPaid, it doesn’t matter if the payment source is a BTC wallet, or MetaMask, or a multi-currency wallet that supports DOGE, LTC and so forth. Once they receive a payment, it is stored in a sub-account for that specific cryptocurrency under the merchant’s account with the payment processors. If the merchant isn’t comfortable with the crypto volatility risks, they can convert the accumulated coins into fiat and withdraw the funds to a bank account (so-called fiat settlement).

PayPal (NASDAQ:) and FIS to offer crypto services: what’s next for digital currency payments?

Although CoinsPaid Commerce, Coinbase Commerce, BitPay and Coinbase Commerce dominate the Bitcoin payment market, the traditional financial industry is now entering this space. Here are a couple of examples that made recent headlines:

PayPal

In October 2020, PayPal announced that it would support buying, storing, and selling BTC, ETH, LTC, and BCH. The company also announced that it would allow customers to pay for crypto purchases as part of PayPal checkout in the early 2021.

For regulatory reasons, the company will have custody over the coins, and users won’t be able to withdraw them to external wallets. Still, it’s a big step forward in the integration of CeFi (centralized finance) and crypto: among PayPal’s 370 million users, hundreds of thousands will probably soon learn how to pay with Bitcoin.

As these users discover more advanced services such as opening crypto deposit accounts and paying with other cryptocurrencies, or converting money from a credit card (CC), to BTC, this will help crypto adoption.

FIS

FIS is the largest payment processing company worldwide with an annual turnover of $9 trillion. The payment giant recently partnered up with CEX.io – a popular crypto exchange – to issue crypto debit cards to UK and selected EU residents. FIS will process the transactions, while the cards will be issued by CEX.io.

The key step towards mass adoption is being able to use cryptocurrency to purchase in brick-and mortar stores and withdraw cash at ATMs. There are already some popular crypto cards on the market – notably Binance and Crypto.com – but the untapped window of opportunity in this niche is still very large.

Twitter

Twitter CEO Jack Dorsey recently said that the company plans to integrate Bitcoin into its services. He didn’t provide details, but possible applications of crypto payments on Twitter could include in-app shopping, subscriptions, and tips. Twitter, with its more than 200 million daily users, could be a hub for cryptocurrency transactions long before Facebook (NASDAQ 🙂 launches Diem, its own cryptocurrency project.

Although it would not be premature to predict that Bitcoin will become a payment method of equal value with fiat currency, this is unlikely. So far it’s legal tender only in El Salvador, and altcoins (starting with Ethereum) cannot even boast that. However, there is a clear growing interest in crypto as a way to pay online, as opposed to credit cards and e-wallets – and here, we might see impressive expansion in the next couple of years.

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