The most famous cryptocurrency, Bitcoin, has been referred to as the most secure currency of the world wide web. With proper care, users can send out and receive money without giving out valuable or personal information linked to their wallets or accounts. Due to the increase in value and market capitalization, many businesses have started offering payment-related services accepting and making payments using bitcoin.
Thanks to the bitcoin payment processor, you can purchase a latte at the coffee shop around the corner by just scanning the shop’s QR code, using only your smartphone and processing your payment immediately. Let’s look at what a bitcoin payment processor actually is.
What is Bitcoin Payment Processor?
Bitcoin payment processors is new technology, that makes it possible for businesses and merchants to receive payments in Bitcoin from customers who purchase products and services. This concept works exactly like when a standard debit or credit card is being processed, but now with bitcoin as a transactional currency. For instance, you go to your supermarket, and you purchase by swiping your card at the POS stand, inputting in your pin to confirm your payment. Similarly, you can also process payment at the target website, make the same purchase using that same debit or credit card by entering the details on the payment page of the website.
In those instances (the in-store shipping and the web payment), a payment processor is required to process the payments by enabling authentication and processing these cards for payments. The payment processor makes it possible to record and transmit the required data for payment, authenticating it and making sure money is being transferred to the target’s account while sending out notifications to stakeholders. They are intermediaries between the purchaser and the receiver when it comes to processing bitcoin payment, and this involves recording the transaction on the public blockchain ledger.
How does it work?
Most bitcoin payment processors offer several mediums for businesses to accept bitcoins. These include solutions for online e-commerce platforms like target, Amazon, etc; for payment through in-store POS systems such as Elly. One can also use this system as a solution for accepting donations in bitcoin using this service. Technically anyone who opts in for bitcoin payment processing can start receiving bitcoin payments from consumers using any kind of transaction medium from all around the world. A smart kid in Africa can create an app that can receive and send out bitcoin payments integrated with the android software development kit. Or an eatery in France can use a bitcoin-enabled POS device from Elly to receive and process payments from its customers.
Payment for Bitcoin
The work step gets executed as follows:
- The buyer opts in for bitcoin payment when checking out (in-store POS counter or website checkout page)
- They pay the amount which is in line with the exchange rate as of the time of the transaction.
- The bitcoin payment processor then converts the Bitcoin the merchant receives to the currency they choose, minimizing risks from volatility.
- The cash then gets added to their account and then sent to a selected bank account once the cash they have gotten passes the required threshold.
- The bitcoin payment processor automatically converts the bitcoins into any currency, and you can even decide to just keep the bitcoins in your wallet instead of swapping them for fiat currency.
Why is it gaining in popularity?
Now that companies are using bitcoin and blockchain to work around different areas which involve supply chains etc. Linking these becomes very important because companies can then automate payments, accept payments and confirm transactions. There are various reasons why bitcoin payment systems are gaining popularity, and these are:
A bitcoin payment processor gives greater liquidity to the markets
Accepting payments in bitcoins using a payment processor means new sources of liquidity for businesses that accept the payments. Even if they comply is cash-based, they can use other valuable assets and cryptocurrencies like bitcoin to transact within the supply chain. Since they do accept bitcoin, they may not pay manufacturers or suppliers with that same currency. A bitcoin payment processor helps provide companies with instant cash and ways to convert their bitcoin into fiat currencies allowing improved liquidity and decreased liability.
Bitcoin payment processors may reduce costs for both companies and customers
While you can buy anything now with bitcoin such as pizza or coffee, payment processor systems are best for merchants who deal with a large number of transaction volumes. You would need to improve in areas where there are inefficiencies, and these might be larger industries and shops. This is where improvement and innovation on existing structures are needed the most. A bitcoin payment processor takes the burden off companies by providing a simple solution for both the company and customers using it. Allowing companies to undergo transactions automatically and avoid high transaction fees is a nice step towards cost savings.
Streamlined payment may increase efficiency and automation
Most supply chains have individual processing systems, but they are disjointed. They don’t work well, and that process has caused consequences for a business. For example, even supply chains still have problems such as delays and hassles when working with outdated systems. Each cryptographic key used may look simple, but they need different parts to function. Applying a bitcoin payment processor is essential to increase both automation of bitcoin payments and the efficiency it brings when payments are streamlined. The payment processor does all the hard work of verifying, processing, and approving the payment so merchants don’t have to.
Is the bitcoin payment processor changing the financial industry brick-and-mortar trends?
Bitcoin has recently been known and is now under the eyes of monetary authorities and regulatory agencies across the world. Countries like the United States and Japan have permitted and allowed transactions and trading to take place while countries like China have straight-up tightened their rules on this cryptocurrency. Nevertheless, the overall increasing use of bitcoin indicates that more and more countries and international users are keen on using them for transactions. The presence of a borderless and parallel economy that is not controlled by governments is putting the traditional way of accepting cards and merchant service providers at more risk.
From the beginning of e-commerce when everything was dealt with fiat currency to now, where most establishments are switching to accepting bitcoin, the said services which aid in fiat currencies are going to feel the heat.