With the acceptance of cryptocurrency as a valid form of payment, online merchants have a remarkable opportunity to attract more customers and increase sales.
Until recently, there have been limited payment options to make online purchases of products or services. Most merchants offer credit cards or bank transfers as the primary (or only) option to their customers. In certain geographical markets, payment options are even more limited. For example, in Germany, credit cards are not heavily favored as a payment option; customers primarily use bank transfers to make purchases from Amazon and other e-commerce merchants.
Reliable crypto payment processing stands to be a game-changer for online purchases. However, as with any digital purchasing modality, there are benefits and drawbacks to cryptocurrency as a payment method. At Vendo, our experience in crypto payment processing for our e-commerce merchants shows that the pros of crypto outweigh the cons.
Benefits of Cryptocurrency
Crypto entered the digital marketplace about a decade ago. It’s now much more mainstream, with hundreds of cryptocurrency exchanges and brokers from which individuals can purchase cryptocurrency and fill/refill their crypto wallet. As the purchase and exchange of crypto have become commonplace, the options to use it as a payment method also have increased as more merchants began accepting it alongside credit card and bank transfer payments.
So why is crypto gaining popularity as a payment method?
One primary benefit of cryptocurrency payments is anonymity. This is a significant advantage for online merchants in high-risk industries, in particular. Purchasers can rest assured that their privacy is protected with a crypto payment, which is not always the case with credit card transactions or bank transfers. These traditional payment options attach the customer’s name and bank information to each purchase. A crypto payment anonymizes the purchaser throughout the checkout process.
The benefits of anonymity does not necessarily lead to a shift from credit card payments to crypto transactions. Merchants at Vendo who chose to add crypto as a payment option saw a one to five percent increase in overall sales, and not just a move from credit card to crypto payments.
In other words, simply offering crypto as a payment option has added to purchasing volume, instead of replacing other payment methods. Merchants are witnessing sales to an audience they have never interacted with before.
To be clear, anonymity benefits the buyer more than the merchant. Your payment processor must remain vigilant against fraud. The crypto industry lacks the same regulatory rules and protections as credit cards and bank transfers.
At Vendo, we apply the same compliance and transparency protocols to crypto that we do for traditional credit card payment methods.
This helps to confirm the validity of the merchant and their business, but does not compromise the benefits of anonymity for the consumer.
Another advantage is that cryptocurrency “unlocks” certain regions of the world where credit card penetration is low. Countries in Europe, as well as Africa and South America, are seeing rapid adoption of cryptocurrency. Merchants also can offer crypto payments to access high-conflict or unstable regions, such as what we’re currently seeing with Russia and their economic sanctions. There also may be customers potentially interested in crypto payments in countries, such as Germany, that enjoy a thriving e-commerce market, but have low credit card usage.
In some countries, it is simple to get a credit card. In others, it’s next to impossible due to either the culture or banking and governmental regulations. Offering cryptocurrency as a payment method opens up a whole new world to countries like Brazil and Argentina. In Brazil, half of the population does not possess a bank account, prohibiting those individuals from even opening a credit card account. Cryptocurrency, along with unique e-payment methods such as PIX, offers a solution to these customers.
Cryptocurrency also expands opportunities for high-risk industries. Payment processors like PayPal are averse to facilitating transactions for high-risk industries, such as adult entertainment, dating, betting/lotteries, and CBD products. Cryptocurrency provides merchants in high-risk industries with a viable payment option, especially where mainstream banks and processors may not supply any option. As cryptocurrency gains traction globally, we anticipate increasing numbers of mainstream merchants adopting this payment option.
Another considerable benefit for merchants is the “cash is cash” concept. That is, no matter how buyers purchase a product or service—credit card, crypto, bank transfer—they receive their funds in their local currency (e.g. euros, dollars, pesos, reals, etc.). Vendo processes all different types of payments as a consolidated effort. The merchant then receives one transfer.
“Cash is cash” payments also mean merchants don’t have to worry about the volatility of cryptocurrencies. The payment is transferred to the local currency when the transaction is made.
Finally, obtaining a merchant account for cryptocurrency is much faster than other payment methods. In high-risk industries, setting up a merchant account for credit card payments can take three or four weeks. With cryptocurrency, approval and onboarding is complete in two or three days.
Detriments to Accepting Cryptocurrency
The list of cryptocurrency’s drawbacks is much shorter than its benefits—but there are still factors merchants must consider. Perhaps the biggest one is that payments are very slow in comparison to credit cards. Visa can handle approximately 24,000 transactions per second, while the fastest cryptocurrency, Bitcoin Cash, can handle 60.
The reason for slower processing is that cryptocurrency is based on blockchain technology. Whenever a transaction occurs, it is placed in a queue. Before it is confirmed, it has to get into the blockchain. Transactions stay in queue until there is room for them. This can take 20 seconds or, in rare occasions, as long as 45 minutes.
Merchants do need to consider the limitations of processing time in respect to digital products. Many purchases are meant (and expected) to be instantaneous, such as with a live stream or subscription that buyers want now. For other types of purchases, such as clothing and electronics customers may be more willing to wait for a longer processing time because delivery of the purchase is not meant or expected to be immediate.
The good news is, about 95% of transactions are approved within one minute. It’s the other five percent that merchants have to consider carefully.
A second drawback to cryptocurrency is that not all payment processors perform the same due diligence when it comes to compliance checks. There is no global regulator for cryptocurrencies like there exists for credit card companies. So, there is some risk when merchants partner with a payment processor who may not be using optimal due diligence with crypto onboarding and transactions. The best approach is for merchants to research and ask the right questions surrounding compliance, even though payment processors are not required to conduct any checks.
The same could also be said for customer service performance.
At Vendo, our customer support professionals have been thoroughly trained on cryptocurrency.
They know how to process a refund to a customer’s wallet or how to proceed if a customer did not receive their product or service. Again, it’s important for merchants to investigate the level of customer service a payment processor is able to provide.
The bottom line
Cryptocurrency as a payment method is a viable, proven way merchants can expand their customer base and attract more sales. E-commerce merchants who choose to add cryptocurrency using a credible and vigilant payment processor can gain a competitive advantage and be at the forefront of their industry.
Contact us if you’re interested in learning more about cryptocurrency as a payment method or if you would like to start the onboarding process. Vendo is offering 100% free cryptocurrency processing until 2023 for merchants who sign up for our credit card processing services and meet minimum revenue requirements.
Vendo offers comprehensive payment processing services to high risk industries, including content platforms, cam operators, and e-commerce sites. Our innovative, AI-powered tools offer merchants simple, secure, and seamless payment solutions, along with expert customer support from integration to end-user concerns. Our expert team works 24/7 to shape your vision into reality.