A cryptocurrency payment gateway acts as a facilitator for digital currency transactions, similar to traditional payment processors used for credit card transactions. These gateways are designed to enable merchants to accept crypto payments while instantly converting them into fiat currency.
As more businesses start accepting cryptocurrencies, these gateways play a crucial role in alleviating the fears and uncertainties associated with cryptocurrencies. It enables businesses to expand their payment options and meet the needs of a broader customer base.
It is worth noting that using a cryptocurrency payment gateway is not mandatory for businesses. Although it is entirely possible to accept cryptocurrency payments directly into a personal wallet, payment gateways simplify the process. Here is an overview of how these portals work:
Integration:
Merchants integrate a cryptocurrency payment gateway into their payment systems. This can be achieved through various means such as plugins, APIs, or other software tools, and takes anywhere from 2 to 8 weeks depending on the setup. For physical stores, a card reader-like device is used, compatible with the point-of-sale system.
Payment by Customer:
At checkout, customers can choose to pay using cryptocurrency. They are presented with options to choose their preferred digital currency, see the market exchange rate, and wallet address often displayed as a QR code to pay.
Processing and confirmation:
The portal processes the transaction and ensures that the payment details and amounts are correct. Once the transaction is verified on the blockchain, both parties are notified of the success of the payment.
Settlement:
The gateway either forwards the cryptocurrency directly to the merchant is wallet or converts it to fiat currency. The settlement method can vary some gateways offer instant transfer, while others may settle daily or periodically.
Operational considerations
Traders do not need to manage or understand the complexities of cryptocurrencies, as the gateway handles the entire process. It is important for traders to be aware of their country is regulations regarding cryptocurrencies before partnering with a portal, as these services can operate internationally and regulations vary widely.
Fees and endorsements
Gateways use cryptocurrency wallets for transfers, resulting in fees charged by validators in the currency network.
Validators, who verify transactions and blocks in the blockchain, are compensated for their computational efforts in small increments of cryptocurrency.
This fee, along with the service fee, is usually passed on to the merchant.
