Crypto, wallet key when choosing a processor

Welcome to “The Merchants Guide to Accepting Crypto: The Questions to Ask,” a new PYMNTS series aimed at helping merchants large and small, online and in-store, who want to accept crypto payments figure out what they need to know in order to move forward.

In this second of seven articles, PYMNTS’ Karen Webster spoke with Stephen Pair, CEO of crypto-specific payment processor BitPay, which has been around for 11 years, to discuss the range of cryptocurrencies and digital wallets that should be offered and supported.

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

After a merchant has decided they want to accept cryptocurrencies at checkout, the next thing they need to do is decide which ones to accept – there are around 10,000 cryptos out there to some extent.

“When you ask merchants what payment methods they want to accept, many times the answer is all of them,” Pair said.

However, the best answer, Pair said, is a payment processor that can accept all the major cryptocurrencies — which isn’t really as scary as it sounds. First, if you measure by market value, the first dozen or so will cover the majority of potential buyers. BitPay currently accepts 13, covering approximately 70% of the wealth stored in crypto.

“Secondly, we see interesting coins, like dogecoin, that generate a lot of interest and really have a marketing value for the seller,” he added. Third, merchants may also want to look at smaller cryptocurrencies that do interesting things with payments.

Understanding wallets

Next come the digital wallets, and while there aren’t thousands, there are certainly hundreds. In this case, it’s a two-pronged answer, Pair said. One is that your processor should evaluate and support as many as possible, but the other part is that the processor should test and understand each wallet.

“Some wallets behave better than others, so you want to make sure the processor tests those wallets,” he said. “You want to make sure you don’t just accept the payment as the wallet would generate it. Some wallets will get the payment right 100% of the time. Other wallets leave it up to the user to enter the amount to pay.”

That means “there are many ways a wallet can make a mistake, generate an overpayment or underpayment,” Pair said, pointing to different ways of calculating exchange rates as an example. “They can go wrong in a lot of different ways. And sometimes you have to educate the buyer as well, depending on the wallet and how easy it is to use. There are pitfalls.”

That means testing as many wallets as possible to ensure the consumer is getting the best possible experience and, where necessary, teaching them how to use that wallet or even “recommending that perhaps 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 protect the merchant from some of that,” he said. “If these errors happen, there should be an automatic refund scenario or a way to correct the error that doesn’t involve the seller or their support staff.”

One practice that BitPay follows, he said, is to let the merchant decide whether to take as many wallets as possible — and accept that there will be some issues to be worked out — or only accept wallets that work all the time, and accept that some customers will be omitted.

“We’ll handle all the details,” he said. “If someone accidentally underpays or overpays, we’ll handle the whole process with the consumer, get the money back and redo the transaction. The merchant never has to know.”

As for the format the payment takes, Pair suggests choosing a processor that can make payments in the merchant’s local currency instead of taking the crypto into their own wallet.

Aside from the ease of use, the tax rules for crypto can be complex and are not yet clear in the US, in particular, capital gains tax requires 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, Pair said. Although it looks the same to the user and the seller, there are significant differences, starting with the reality that payments are not actually 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 don’t actually allow you to deposit or withdraw crypto, and they don’t actually allow you to use the blockchain for payment,” he said. “They just subtract from users’ balances.”

As a result, “you’re not reaching the broadest crypto user audience,” Pair said, arguing that people who want to pay with crypto tend to be more experienced crypto “power users” who would rather retain control of their digital assets . than leaving them on a hosted wallet.

“You really want the processor to be able to accept 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 crypto users 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, only sending results down to the slow, often congested and expensive main blockchain.

“A lot of companies are building support for the Lightning Network,” he said, noting that it increases the speed of payment but still has the security — and popularity — of the bitcoin network. “I think it’s really important for the processor to support that.”

Make it simple

Finally, Pair said merchant integration is an area BitPay is concentrating on, with the simplest integrations – a simple button on a smaller merchant’s website – taking minutes, while those using popular online or self-powered e-commerce platforms can generally be completed in a few hours .

Larger merchants with purpose-built e-commerce 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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