Experienced traders seek answers to crypto questions

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 fourth installment of the seven-part series, PYMNTS spoke with Jagruti Solanki, CFO of crypto payment technology firm BitPay, about the types of questions companies considering adding a crypto payment processor partner are currently asking.

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

Second part: Supporting the right cryptos and wallets is key when choosing a payment processor

Part Three: Getting crypto payments compliance right requires deep experience

Over the past 10 months or so, the company has seen “much more sophisticated inquiries,” Solanki recently told PYMNTS. “Several years back, I would say sellers and businesses were asking the question, ‘Why crypto?'”

It is past that point now,” Solanki said. Now it’s more about: “What kind of questions should I ask?”

Sellers say, ‘OK, I’ve accepted that I have to do this,'” she said. “What kind of due diligence do we have to do? What does the company we want to partner with to offer crypto have to have?”

Solanki added that there is “a lot more focus on understanding the onboarding process” and getting “comfortable working with companies that offer crypto solutions” for payments.

It may have been inevitable as crypto changed from an obscure financial niche to a mainstream phenomenon discussed by financial journalists and bought by a growing number of consumers over the past couple of years.

However, that doesn’t mean there isn’t still a need for a good deal of handholding in the beginning, Solanki said. While that includes things like setting up an account and handling the first transaction, it also includes more mature issues like how the partner handles your customer (KYC) checks to ensure compliance with anti-money laundering (AML) laws and regulations .

Who wants it?

While the customers who pay with crypto skew young, merchants find that “having crypto as a payment option on the website is quite popular.”

More than that, there are signs that it’s popular with a high-income demographic. Despite an uncertain economy and a 65% decline in bitcoin’s price, “we’ve seen a pretty significant increase in spending patterns for high-ticket luxury items,” she said. “They continue to be popular and there are customers out there who want to pay in crypto for the high ticket items.”

That aligns well with what the PYMNTS 2022 US Crypto Consumer study found. While 28% of consumers had a positive view of crypto as a payment technology, this rose to 32% among high-income consumers and 48% among millennials.

Read more: New data shows that nearly 80% of crypto consumers use Bitcoin to pay online and in-store

What to ask for

Another key feature merchants should look for, Solanki said, is that the provider can make it easy for them to accept crypto.

While BitPay can settle merchants’ accounts with whatever mix of crypto and fiat currency they want, taking all fiat — in dollars or eight other currencies — is still the safest way to go, she noted. In the US, it’s largely because of the tax implications of accepting crypto, which range from capital gains implications to issues with a law that hasn’t even been written yet.

That makes it “super easy … from an accounting, tax and audit point of view, because they don’t see crypto on the balance sheet,” Solanki added.

Areas they should look at and ask questions about include making sure the company they are working with is financially stable, that it has sufficient cash reserves on its balance sheet to make timely settlements, regardless of crypto market volatility.

In addition, there are the provider’s options for settlement.

“Is it ACH? Is it wire … do they have same-day settlement capabilities with that company?” said Solanski. “Which foreign currencies do they support and how many cryptocurrencies are supported? Do they have the ability to track where their transaction is in the process? Is there a sufficient level of compliance being done to ensure that the company meets its regulatory requirements?”

And of course there are fees. These come in two varieties: the sellers pay crypto processors – BitPay takes the standard 1% – and the transaction fees that crypto buyers have to pay.

The latter question depends heavily on the cryptocurrency being used, Solanki said. Bitcoin is cheaper than ether, she said, but there are some cryptos out there that have very low transaction fees – and as a result are much friendlier for payments.

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