Competence, experience and focus are essential when choosing a crypto payment processor

Welcome to the first article in a new PYMNTS series, “The Merchants Guide to Accepting Crypto: The Questions to Ask,” which aimed to help small and large merchants, online and in-store, who want to accept crypto payments find out what they need to know to move forward.

Over seven articles, PYMNTS’ Karen Webster talks to Stephen Pair, CEO of crypto-specific payment processor BitPay, which has been around for 11 years, to come up with a list of skills, experience and services to look for when choosing a payment provider when you has made the decision to accept cryptocurrencies.

A logical place to start, Pair said, is to find out where the processor is headquartered and where it is licensed to do business.

“Vendors are going to be held to the regulatory requirements of their local jurisdiction,” Pair said. “So I think it’s important for the processor to be headquartered in the same country as the seller.”

Other than that, Pair said, the bottom line is that the processor must have a presence in that country and have both the licenses and the know-how to comply with the regulations.

That’s especially important because most merchants don’t need to ask these questions of their traditional payment platforms, Pair said. They are used to dealing with banks and transfers between bank accounts – and it is generally the bank’s responsibility to follow these regulations.

“A lot of times sellers just focus on ease of use and user experience, which are important, but regulatory compliance and choosing a company that is subject to the same regulations is also very important,” he said.

Another big one is making sure the processor has the liquidity and balance sheet to cover multiple days of settlement in that merchant’s own fiat currency, Pair said.

While these are the types of questions sellers should be asking all types of buyers, crypto processors take in crypto and pay out fiat. That means they have to sell the digital assets and settle with the seller. The problem, he said, is that in the volatile cryptocurrency market, “delays in crypto sales or withdrawals from exchanges” are not unheard of. Sometimes it can take several days, he added.

BitPay, Pair said, “keeps several weeks of liquidity available at all times, so we can settle merchants as early as the next business day.”

Long life counts

Given that bitcoin was first launched in 2009, you’re not going to be dealing with crypto payment processors 20 or 30 years into the business.

“In the crypto world, the companies are much younger,” Pair said, putting BitPay’s 11 years at the extreme end of the spectrum.

At the same time, crypto payment processors must also have managers with extensive experience in traditional financial markets, he said.

“There is much we can learn from the legacy payments industry, particularly in terms of regulatory compliance and the needs and concerns of merchants,” Pair said. “You just can’t replace decades of experience with a few short years of working in the crypto world.”

Likewise, he added, you obviously need solid crypto experience as well.

“It’s a very different platform, a different technology, and there are different issues that people need to be aware of,” he said

First focus

Focus is also important, Pair said, noting that quite a few companies are “doing payment processing that’s just a side business for them,” such as exchanges, cryptolenders and even decentralized finance (DeFi) products.

“Their core business isn’t really payments, so they don’t really give it the attention it deserves,” he said. “I think a lot of these companies are just doing the bare minimum. Maybe they’re not considering the entire lifecycle of a payment, including refunds and managing a complete payment workflow.”

When you’re accepting hundreds or thousands of payments per day, Pair added, “having a good platform to manage that is really important.”

It’s about customer service, he said. And the best way to judge it is by talking to companies that are already working with the crypto payment processor.

Crypto payments are used in all kinds of verticals, so it shouldn’t be too difficult to find another client with a similar profile who can talk about their own experience, he said.

“If you don’t find a perfect fit, just look for good, reputable companies that are on that processor’s customer list and talk to them” to see if they’re happy and feel well served, Pair advised.

Many of the well-known companies already take crypto payments, he said, pointing to BitPay clients such as Microsoft, AT&T and NewEgg.

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