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What is a Cryptocurrency Payment?
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What is a Cryptocurrency Payment Gateway and How Does it Work

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With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
By Niki Nikolaou
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With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
on March 06, 2023 | 6 min
Updated on Jan 22, 2024
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Charles Archer
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Charles Archer is an experienced financial writer specialising in monetary law. With a background in stock market and private equity analysis, he’s worked for many years as a freelance investment author, and has had articles published in a wide range of regional and national titles, both online and in print. He holds a Master’s degree in Law from the University of Law, the UK’s largest legal training institution. Charles believes the key to successful investing lies in quality research, and aims to offer a unique viewpoint that investors cannot find elsewhere.
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Bitcoin transactions averaged between 250,000 and 350,00 per day from January 2022 to January 2023. Despite the growing popularity of cryptocurrencies, traditional payment providers are unable to support them. This is because they cannot facilitate un-intermediated and anonymous transactions, which forms the basis of digital currencies. This opens up the need for processors dedicated to crypto transactions, known as cryptocurrency payment gateways. More than 8,500 cryptocurrencies have gained acceptance as payment for purchasing goods and services, boosting the demand for crypto payment gateways. Read on to learn what a crypto payment gateway is and how it works.

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What is a Cryptocurrency Payment?

Cryptocurrency payments are peer-to-peer trustless methods that use digital coins as payment for goods and services. These digital tokens or coins are cryptocurrencies that the two parties (merchants and consumers) agree to use and consider valuable due to their demand and underlying blockchain technology. Crypto payment gateways facilitate such payments.

What is a Crypto Payment Gateway?

Cryptocurrency payments are peer-to-peer trustless methods that use digital coins as payment for goods and services. These digital tokens or coins are cryptocurrencies that the two parties (merchants and consumers) agree to use and consider valuable due to their demand and underlying blockchain technology. Crypto payment gateways facilitate such payments.

For User

A crypto payment gateway allows users to purchase goods and services from merchants from anywhere in the world and pay in crypto. The payments are transparent and secure. Additionally, transaction costs are much lower, and transactions are much faster compared to fiat.

For Merchant

Merchants with regional regulatory limitations can still offer their goods and services to pro-crypto customers across geographic regions. They can choose to receive payments in a crypto wallet, or the payment gateway accepts crypto payments and deposits the corresponding fiat into the merchant’s account, which helps merchants accept crypto payments without having to own any crypto.

How Does a Crypto Payment Gateway Work?

Crypto payment gateways process payments within the decentralised blockchain network, without any intermediary. They allow merchants to receive payments in cryptos and hold them in their wallet. Otherwise, the crypto payments are converted to the merchant’s chosen fiat currency and the amount is transferred to their bank account.

For users, here’s how a crypto payment gateway works:

  1. After finalising the goods or services to purchase, the user selects the crypto option at the checkout page of the merchant’s website or mobile app.
  2. The user is redirected to the transaction window of the crypto gateway.
  3. The user needs to provide their crypto wallet address. They will need their private key to authorize the payment.

Users also have the option of paying in fiat currencies which are then converted to the chosen cryptos of the merchant. If you are wondering how a cryptocurrency payment is different from other digital transactions:

The merchant integrates the crypto payment gateway using APIs. This is like using any other payment enabler. The difference lies in the processing of payments. Designated nodes on the network validate the transactions and record them onto the shared distributed ledger, making them irreversible. The money transfer dynamics depend on whether the user is paying in fiat or crypto and whether the merchant withdraws the amount in the same or a different crypto or a specified fiat currency. Since there are no banks involved, crypto payments are typically faster and more secure than fiat payments.

Types of Crypto Payment Gateways that are Relevant Today

The two most relevant types of crypto payment gateways are:

DeFi Gateways

These are non-custodial providers that give users full control over their funds via private keys and incorporate high-security measures while maintaining transparency.

Multi-Cryptocurrency Payment Gateways

These allow merchants to accept payments in different cryptocurrencies. They are most useful for cross-border businesses as they eliminate intermediaries, delays, and costs incurred in forex-based international payments.

Steps for How to Implement a Crypto Payment Gateway

Integrating a crypto payment gateway into the checkout section of the merchant’s website is simple:

  1. Choose a trusted crypto payment gateway.
  2. Carefully read the integration documentation and guidelines.
  3. Register yourself with the payment gateway provider.
  4. Submit the documents for your KYC.
  5. Use the APIs provided to integrate crypto payments on your website.
  6. Choose tools from the library to offer users.
  7. Add crypto payment buttons to your website.

Most gateways support customisation of the text and matching the buttons to the aesthetics of your website. Some support more customization like allowing users to switch the price view from crypto to fiat.

What are the Main Features of a Crypto Payment Gateway?

The primary function of a crypto payment gateway is enabling payments in cryptocurrencies and a hassle-free exchange between cryptos and fiat currencies. There are some features that distinguish services and garner more user trust:

P2P Transactions

Crypto payment gateways facilitate with peer-to-peer transactions, allowing businesses, retailers, and merchants to directly receive crypto payments from global customers. They offer the flexibility to choose the mode of payment and withdrawal, while enabling the seamless exchange of cryptos and fiat currencies.

No Middleman

Payment gateways eliminate the need for banks or other third parties, enabling fast transactions. The removal of intermediaries reduces transaction costs and protects both parties from chargeback fraud.

API-Driven Integration

The API-based architecture makes it easy to integrate the crypto payment gateway into any existing application. Crypto payment gateways are highly customizable and deliver a seamless user experience. Plug-and-play tools give merchants complete control over the facilities they want to provide their customers.

International Transactions

While a fiat transfer generally takes around 7 to 15 days, cryptocurrency payment gateways complete remittances within a few minutes. Small and medium-sized businesses benefit from timely payments as they have little scope to manage delays, especially in cross-border transactions.

Mobile Accessibility

Most well-known payment gateways support mobile compatibility. This helps merchants expand their outreach given the rising number of mobile-first customers.

Compatibility Across Operating Systems

Decentralized payment gateways are very flexible and can be integrated with any operating system without any significant configuration changes or complex installations.

Automated Settlements

These are highly flexible in allowing merchants to convert cryptocurrency into another, or to fiat. Some of them support the integration with crypto exchanges that allow merchants to automate the use of their crypto funds for purposes like staking or lending.

Donations Option

With international non-profit organizations like UNICEF accepting donations in cryptos, payment gateways have started offering a direct donation facility for merchant and their users. This makes way for deeper penetration of cryptocurrencies into the financial ecosystem.

Real-Time Exchange

Crypto payment gateways allow merchants to exchange cryptos in their account for fiat in real-time. Additionally, some of them include real-time price charts and crypto-related market updates to help merchants decide when to sell their crypto holdings.

Crypto Payment Gateways Pros and Cons

The application of any technology has some pros and cons and so do cryptocurrency gateways:

Advantages of Crypto Payment Gateways

  • Allow merchants to enter wider markets and users to access goods and services from across the world.
  • Simplify the crypto payments process and bring it on par with fiat transactions at a lower fee.
  • Maintain transparent, peer-to-peer, trustless transactions, while offering better speed and security.
  • The underlying blockchain network protects users from chargeback frauds, which is quite common in international fiat transfers.
  • Multi-cryptocurrency support reduces volatility risk for merchants.

Disadvantages of Crypto Payment Gateway

  • As the gateway becomes an intermediary, the transactions are not fully decentralized.
  • Merchants are completely dependent on the exchange rates offered by the gateway service provider.
  • Transactions via payment gateways are costlier than direct blockchain transfers.

How to Choose the Right Crypto Payment Gateway for Your Business

Here’s a checklist to help you select a suitable crypto payment gateway provider:

Do They Offer the Coins That Your Customers Use?

For businesses targeting to enter specific markets, it is very important to ensure that the gateway offers cryptocurrencies preferred by users in those markets. Merchants looking to expand their outreach can begin by choosing a gateway that supports the most popular crypto coins.

Fees Can Vary Across Different Processors

This is one of the most important factors. Merchants should enquire about all the fees and charges involved. They should also know whether these charges are fixed or vary according to the size of the transactions. Finding out about the exchange rate offered is very important.

Customer Experience

Merchants want to give their customers a seamless and secure crypto transaction experience. Checking online reviews and testing the facilities of various payment gateways before integrating one can help identify the one offering the best experience.

Final Thoughts

Digital currencies have entered mainstream finance and their adoption rates are highest in the emerging markets. By integrating a crypto payment gateway, merchants can expand their reach to these markets at lower costs.

FAQ

  • Are crypto payment gateways safe?
    Crypto payment gateways have blockchain as their underlying technology, which is inherently secure and decentralised. By their nature, crypto payments ensure that transactions are irreversible and cannot be forfeited.
  • Why should you use a crypto payment gateway?
    Cryptocurrency payment gateways enable merchants to enter otherwise inaccessible markets. They allow customers to pay in cryptos of their choice and convert this to the merchant’s preferred cryptos or fiat currencies.  
  • What is the best crypto payment gateway?
    Merchants should pick a trusted payment gateway that facilitates transactions in the cryptocurrencies used by their customers.
  • Which is the most popular payment gateway?
    Coinbase is one of the oldest cryptocurrency payment gateways. It facilitates payments in more than 100 cryptocurrencies across the globe. Other popular ones are Coingate, Coin payment, and Blockonomics.
  • What is the biggest payment gateway in the world?
    Coinbase is the largest payment gateway. It is fast and secure. It accepts payments from bank accounts, debit or credit cards, and online payment channels like PayPal.
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About Niki Nikolaou
With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
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