Cryptocurrency Payment Gateways: What are they, and how do they work?

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The truth is, if you can wrap your head around a fiat payment gateway, you'll be able to understand the basics of how crypto payments processors work too — they both operate on similar principles.

A payment gateway is effectively an application as a service that taps onto online retailers, e-businesses and traditional brick-and-mortar businesses to authorise the processing of transactions. Visa is currently the largest payments gateway in the world, and without it, in many instances, there would be no connecting force between the services charging accounts and the merchants requesting the charge.

Similar systems operate in the crypto world, enabling merchants to accept crypto payments in addition to fiat currencies. This is incredibly important, as it reduces barriers to payment. After all, the number of businesses that weren't willing to hop on the contactless credit card revolution is negligible – giving customers comfort in payment is a no-brainer, regardless of personal opinions on the kinds of payment methods that they use.

Diving deeper into the similarities and differences between crypto and fiat payment gateways, the inner workings of Bitcoin payment providers, integration types and best practices is key to our overall understanding of these connecting forces. Indeed, that's exactly what we'll be doing today.

What Are Crypto Payment Gateways?

While not identical to fiat payment gateways, there are some similarities. Crypto payment gateways are services that allow merchants to accept cryptocurrency payments as part of a general ethos of accepting online payments This could be on an e-commerce platform, a website, a mobile app or even an offline brick-and-mortar store. The gateway's role here is to process and transfer the crypto payments, depending on the needs of the merchant, be it a 'hands-on approach' to crypto or a 'hands-off'. At the moment, the biggest cryptocurrency payment system by volume in the world is CryptoProcessing by CoinsPaid. With 9+ years of experience and a monthly transaction volume of over €1 billion, the platform takes first place as a market leader. However, many other platforms offer similar services, assisting their clients in accepting payments in crypto.

Benefits of Accepting Cryptocurrencies for Businesses

Understanding the role of crypto payment gateways requires a deeper dive into the benefits that merchants are able to tap into via offering crypto as a payment method. Indeed, there are many.

Firstly, crypto is a borderless, instant medium of payment. There are 180 currencies in circulation, each limited to the jurisdiction of mint. Great British Pounds may not be used in the United States without a conversion to US Dollars and vice versa. With cryptocurrencies, payment becomes universal, borderless and instant. International transfers can often take up to five working days and can be incredibly expensive on the customer's side. This reduces their willingness to spend – hardly a good outcome for the merchant.

Secondly, accepting cryptocurrencies can be a great marketing tool; more and more companies are moving into the realm of Web3 and they are attaining recognition for it as pioneers. At this very moment, there's an opportunity for every business to trailblaze for their industry and snatch up the additional market demand pent up amongst the 1 billion + users of crypto oday. With new partnership opportunities, an added niche to attract investment and unique strategies for market-entry, businesses can be scaled rapidly.

For instance, UK-based private jet service, Mirai Flights, was able to increase its revenue by 30% since partnering with CoinsPaid to accept cryptocurrencies. Due to instant nature of digital asset transactions, over 10% of the company's fliers now pay in crypto.

Next, fees are a very important facet of the crypto advantage-ball, so to speak. Whereas the payment processing companies of Web2 can charge merchants up to 3.5% per transaction, companies such as Coinspaid guarantee a maximum fee of 0.8%, with discount schemes pushing that number even lower. In other words, it's a fantastic cost-cutting opportunity for businesses.

Lastly, when it comes to the blockchain, there's no centralised authority to verify the user. In this case, by default, chargebacks cannot be allowed and acceptance rates are on average incredibly high. That figure is 99% with CoinsPaid. This is a fantastic advantage for the merchant; not only does it stamp out any chance of chargeback fraud, but it also means that rolling reserves aren't required to be as high. More capital will be available to the business.

How Do Cryptocurrency Payment Gateways Work?

Cryptocurrency payments integrations can look quite different to that of fiat payments on the merchant side. This is mainly because there is an 'instant conversion' mechanic at play which converts the crypto into a fiat balance such as EUR. There are usually familiar processes when it comes to both deposits and withdrawals – after all, with an online gaming business, there is often the option to 'top up' some kind of balance which can then be withdrawn at a later stage.

1. When depositing crypto, a user will likely see a "crypto deposit" option on the merchant's site, being invited to choose the kind of crypto that they choose to pay in;

2. According to the input information, an address with a QR code will be presented to the user;

3. Depending on the user's preferences, they may choose to either scan the QR code using their phone, which will then open the installed crypto wallet on their smart device, or copy and paste the address manually into the built-in interface of their crypto wallet application;

4. The user will then initiate the transaction, during which the payment processor will make an automatic exchange of the received crypto into the desired fiat balance;

5. The merchant's system then receives an API callback with the information about the deposit including the transaction's status, currency pairs, amount, fees and so on;

6. Lastly, the amount is added to the user's EUR balance on the merchant's site.

Withdrawals are just as simple, and they start with a fiat balance on the merchant's portal and a user request to withdraw in crypto.

1. The user will interact with a 'crypto withdrawal' option on the merchant's site, being invited to choose the kind of crypto they wish to be paid in;
2. They will then be invited to insert their address for payout;
3. According to the input information, the site makes a request to the processing party;
4. The payment processor makes an automatic exchange from the selected fiat currency, such as EUR, to an indicated cryptocurrency, such as BTC;
5. The merchant's system receives an API callback with transaction parameters, including the transaction's status, currency pairs, amount, fees and so on;
6. Lastly, the user's EUR balance is decreased as per the transaction amount.

With every cryptocurrency payment processing gateway, there is a certain degree of flexibility as to the way in which users will input their information and confirm transactions. A big element of that flexibility relates to payment methods. CoinsPaid, for instance, offers a variety of options to fit any business model:

• Invoices without restriction of payment time. Here, the user chooses a currency of payment themselves without a time restriction. The rate will be fixed when the user confirms their payment currency.
• Invoices with payment time restriction. Here, the user chooses a currency of payment themselves, but the time restriction will be 15 minutes starting from the creation of the invoice.
• Payment Channel Networks. These are blockchain-based systems that allow for numerous, fast and cost-efficient transactions between two parties for a set amount of time.
• Plugins. These are pieces of software that integrate into an existing program as a pop up or an embedded payment portal, for example.
• Payment links. Simply, a link is generated and sent to the client over email or an instant messenger such as Whatsapp.

Integrating Cryptocurrency Payment Gateway

Crypto payment providers, such as CoinsPaid, tend to integrate via API. If you've ever integrated another service's API onto your platform, such as that of an automated KYC vendor, this will be a familiar process to you.

If you're unfamiliar with what an API is, it's effectively an interface that allows the merchant's website to 'talk' to a platform's server.

Before you commit to a service, the team behind a crypto payment platform will aim to provide you with a demo account so you can get comfortable beforehand. Here, you'll be able to familiarise yourself with the merchant dashboard and test all the tools, but some pre-test steps are usually required from you. As is the case with CryptoProcessing by CoinsPaid, you'll be invited to download a testnet Bitcoin wallet, before acquiring testnet coins by visiting a designated website and entering your address, generated in the testnet Bitcoin wallet.

If you choose the hands-on approach and hold cryptocurrency on your books, you can choose which digital assets you want to store the funds in and set up automatic conversions of the incoming crypto revenue into this currency. You can set up withdrawals from the CoinsPaid account to an external crypto wallet. Often, merchants have a cold wallet, like a Ledger or Trezor, and store larger amounts there for extra security.

Alternatively, if you choose the hands-off approach, then in the dashboard you can set up automatic conversions into fiat, like USD or euro, when using the processing API. Also, you can make a withdrawal of fiat to a bank account, you'll just need to link the account to your CoinsPaid dashboard. Also, in the dashboard you can set up the access roles for different people in your company – for example, who can just view the transactions, and so on.

As you can probably tell, the integration process on CryptoProcessing.com is pretty convenient and straightforward– this is why we've chosen to analyse their integration procedure in our article today.

What to Pay Attention to When Choosing a Cryptocurrency Payment System?

So, it's clear that there are a number of advantages to selecting a cryptocurrency processing partner. However, as we've covered, cryptocurrency can be tricky to manage. Therefore, the advantages are only to be reaped should the provider satisfy a number of criteria.

• Firstly, a risk scoring system should be in place. In other words, one needs to be sure that a provider conducts ongoing transaction monitoring to stamp out any possibility of money laundering, terrorist financing or other criminal activity;
• Secondly, the provider should support fiat conversions. Regardless of whether a company is looking for a 'hands-on' or 'hands-off' approach, instant fiat conversion is commonplace in the industry and one should have questions for Bitcoin payment gateways not interested in its provision. For example, CoinsPaid makes sure that their clients don't need a background in crypto;
• Next, make sure to check the setup fee. The fine print will often reveal hefty setup fees under the guise of 'API integration fees'. The truth is, crypto payment processing is fairly easy to set up, which is why the largest player on the market, CryptoProcessing by CoinsPaid, doesn't have any setup fees; 
• SWIFT and SEPA are the two most widely used forms of cross-border transfers. If a cryptocurrency payment processor doesn't support either one of these, you should have questions relating to their scalability and ability to handle cross-border payments; 
• As an honourable mention – one should investigate the frills of a company's offering. What can they offer your company to sweeten the pot? Often, channels, invoices, e-commerce plugins and a large number of payment options can be welcome bonuses.

It'll come as no surprise that CoinsPaid offering checks each of these boxes. For that very reason, we're convinced of its title as the best cryptocurrency payment gateway on the market.

Summing up

As with most things in life, getting your head around crypto processing is easy, but understanding it on a technical level is much harder. Alas, we arrive at the aim of today's article – to provide a crypto-curious audience with a comprehensive guide on crypto payment providers.

Today, we've defined the merchant-side benefits in accepting crypto as a payment medium, we've taken a look under the hood of cryptocurrency payments, the customer flow and the flexibility that certain systems offer, we've explored a typical integration procedure with the help of the world's most popular crypto payment gateway, CoinsPaid, and lastly, we've endeavoured to provide some pointers on what to look out for when selecting a crypto payment processor for your business.

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