Welcome to “The Merchants Guide to Accepting Crypto: The Questions to Ask,” a new PYMNTS series aimed at helping merchants big and small, online and in-store, who want to accept crypto payments figure out what they need to know to move ahead.
In this second of seven articles, PYMNTS’ Karen Webster spoke with Stephen Pair, CEO of crypto-specific payments processor BitPay, which has been around 11 years, to discuss the range of cryptocurrencies and digital wallets that should be offered and supported.
See also: Expertise, Experience and Focus Are Critical When Choosing a Crypto Payments Processor
After a merchant decides that they do want to accept cryptocurrencies at checkout, the next thing they need to do is decide which ones to accept — there are some 10,000 cryptos out there by some counts.
“When you ask merchants what forms of payment they would like to accept, many times the answer is all of them,” Pair said.
However, the best answer, Pair said, is a payments processor that can accept all the major cryptocurrencies — which really isn’t as daunting as it sounds. For one thing, if you measure by market capitalization, the first dozen or so will cover the majority of potential buyers. BitPay currently accepts 13, covering about 70% of the wealth stored in crypto.
“Second to that, we see interesting coins come along, such as dogecoin, that generate a lot of interest and really have a marketing value to the merchant,” he added. Thirdly, merchants might also want to look at smaller cryptocurrencies that are doing interesting things with payments.
Understand the Wallets
Next come the digital wallets, and while there aren’t thousands, there are certainly hundreds. In this case, there’s a two-part answer, Pair said. One is that your processor should evaluate and support as many as possible, but the second part is that the processor should test and understand each wallet.
“Some wallets behave better than others, so you want to make sure that the processor is testing those wallets,” he said. “You want to make sure you’re not just accepting the payment as the wallet would generate it. Some wallets will get the payment exactly right, 100% of the time. Other wallets leave it up to the user to type in the amount to be paid.”
That means “there are lot of ways a wallet can get it wrong, generating an over- or underpayment,” Pair said, pointing to varying ways of calculating exchange rates as an example. “They could get it wrong in a lot of different ways. And sometimes you need to educate the buyer as well, depending on the wallet and how easy to use it is. There are pitfalls.”
That means testing as many wallets as possible to ensure that the consumer has the best possible experience and, where necessary, educating them on how to use that wallet or even “recommend that maybe the consumer should consider a different wallet,” Pair said.
From the merchant’s perspective, they have to accept that some wallet errors are inevitable, “so you also want the payment processor to shield the merchant from any of that,” he said. “If those errors happen, it should be an automatic refund scenario or some way of correcting the error that doesn’t involve the merchant or their support staff.”
A practice BitPay follows, he said, is to let the merchant decide if they want to take as many wallets as possible — accepting that there will be some problems to be resolved — or only accept the wallets that work all the time, accepting that some customers will be left out.
“We’ll handle all the details,” he said. “If somebody accidentally underpays or overpays, we’ll handle the whole process with the consumer, getting that money back and redoing that transaction. The merchant never has to even be aware of it.”
In terms of the format that payment takes, Pair suggests choosing a processor that can make payments in the merchant’s local currency rather than taking the crypto into their own wallet.
Ease of use aside, the tax rules for crypto can be complex and are not yet clear in the U.S., most notably requiring capital gains tax reporting on each specific cryptocurrency that was accepted at one price and sold at another.
Apps Are Different
Payment apps like PayPal are often a different matter entirely, Pair said. While it looks the same to the user and the merchant, there are substantive differences, beginning with the reality that payments are not really being made in crypto and others are walled gardens for their own users and merchant networks.
“A lot of services out there that allow users to invest in crypto are not actually allowing you to deposit or withdraw crypto and they’re not actually allowing you to use the blockchain for payment,” he said. “They’re just deducting from that users’ balance.”
As a result, “you’re not reaching the broadest crypto spending audience,” Pair said, arguing that the people who want to pay with crypto tend to be more experienced crypto “power users” who want to keep control of their digital assets rather than leave them on a hosted wallet.
“You really want the processor to be able to receive payments from any” of the hundreds of apps that support crypto, he said. Otherwise, you’re “missing out on the hundreds of other apps out there that most people who use crypto actually use.”
Another subset of this is that the processor should be able to support the Bitcoin Lightning Network, a “Layer 2” blockchain that sits on top of bitcoin and handles the transactions, just sending results down to the slow, often clogged and expensive main blockchain.
“A lot of companies building support for the Lightning Network,” he said, noting that it increases the speed of the payment yet still has the security — and popularity — of the bitcoin network. “I think it’s very important for the processor to support it.”
Make It Easy
Finally, Pair said that merchant integration is an area BitPay concentrates on, with the simplest integrations — a simple button on a smaller merchant’s website — taking minutes, while those using popular, cloud-hosted or self-hosted eCommerce platforms can generally be finished in a few hours.
Larger merchants with custom-built eCommerce platforms can be done in just a week or two — plus testing — as BitPay has a “robust set of APIs and libraries, and most of the major languages.”
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