In Which Ways Are Bitcoin Payment Services Similar To Credit Cards?

How Is Bitcoin Gaining Popularity?

Dubbed as the secure money of the internet, Bitcoin is the most popular cryptocurrency. With proper caution, one can make or receive payments to anyone while revealing any sensitive information that is linked to Bitcoin accounts or wallets. Seen surging in transactions is other cryptocurrencies like Litecoin and Ripple. 

Many businesses have started offering payment-related services riding high on the increasing acceptance of Bitcoin as well as other currencies to make and receive payments in crypto. 

Explaining how the Bitcoin payment services work, this article focuses on their advantages with associated costs that users should be aware of whether services are a threat to traditional fiat currency based payment systems. 

What Is A Bitcoin Payment Service?

Whereas there are Bitcoin payment services or Bitcoin merchant services that in a nutshell enable those merchants as well as businesses to receive payments in Bitcoin from the individuals or goods and services that are being sold or delivered. In this way, it works similarly to the processing of standard credit or debit card payment service with specifics to Bitcoin.

As an example to the Bitcoin, when you visit a Walmart store to make the purchase, it is necessary to swipe the credit card at the counter and punching the PIN making the necessary payment. Similar to this when you make an online purchase at the Walmart website, the payment is done using a credit card entering details on the payment page of the website.

Whether it is in-store swipe machine or the online web portal, in both of the cases the behind the scene works as a payment service system enabling authentication as well as the processing of credit card making the payment. Taking care of securely recording and transmitting necessary details of payment, the payment serviced authenticates the credentials enabling the transfer of money from the account to Walmart’s issuing confirmation to the involved stakeholders. 

Working similarly is the Bitcoin payment services as they act as an intermediary layer between the payer and the receiver thereby processing of Bitcoin payments involves recording transactions on blockchain public ledger. 

In this situation they allow merchants to accept payments in Bitcoin which are both online as well as physical locations without buyer or seller worrying about the complex background process involving Bitcoin payments getting executed in the background. 

How Does Bitcoin Payment Service Work?

Offering multiple mediums for merchants to accept Bitcoin payment, the popular Bitcoin payment services include solutions for various platforms like integration with eCommerce platforms like Shopify, PrestaShop as well as Magento where payments is through an in-store point of sale systems with examples of Soft Touch and DC POS, for direct payments within popular billing and accounting solutions like Host Bill as also Invoice Ninja.

Accepting donations in Bitcoin through such services one can also find solutions including integration with donor services like the Nation Builder and Targeted Victory where app developers find readymade functions and code libraries in the Android SDK as well as iOS SDK with programming languages like Java, Perl, and PHP enabling acceptance of Bitcoin payments through apps and portals.

The following workflow gets executed in terms of the steps

At the checkout (in-store, on the web or in-app) the customer opts to make payment in Bitcoin where he pays the amount at the locked-in exchange rate applicable at the time of transaction with the Bitcoin payment service instantly converting the received Bitcoin into the currency of choice eliminating the risks of volatility where money gets added to the account and finally gets credited to the designated bank account whereupon deciding the frequency once accumulated account crosses the threshold limit. 

Instead of exchanging them for fiat currencies, it is possible for one to even opt to get the Bitcoin in their wallet.

For the transaction to be authenticated and recorded on the public ledger, the service securely sends necessary details to the blockchain network. Whereas in this case the miners verifying and adding transactions to blockchain receives a Bitcoin miner fee where it does not go to payment service but gives rewards to the miners for the work done in verification and authentication. 

Advantages Of Bitcoin Payment Services

While comparing it to a standard credit card payment these Bitcoin payments purport to be relatively cheaper due to the lower transaction costs and as a payment service like the BitPay charge a flat 1% settlement fee to the merchant when it is compared to the 2%and 3% charged by the fiat currency credit cards processing service.

Allowing a borderless payment network, the Bitcoin payment services enable seamless transfer of Bitcoin in any amount from anywhere across the globe as well as through any mobile or computer as the merchants account is there in a large number of countries in a currency of the merchants choice.

While these Bitcoin payments claim to be transparent in the highly dynamic exchange rates, it is also between the Bitcoin and the fiat currency.The merchant not only gets various mediums to accept global payments but using these services he also gets a reliable as well as authentic identity in the virtual world of cryptocurrencies making it much safer, transparent and dependable for getting payments.

When being asked to make a direct payment to an individual Bitcoin wallet, versus the payment being processed through the network of the established payment service provider, the customer is sure to find the latter as more trustworthy to proceed with. A business gets this kind of value-add from such services.  

The Threat To Existing Card Processing Services?

Authorities across the globe have brought Bitcoin and other cryptocurrencies on the radar of regulatory agencies while many nations like Japan and the US allow transactions while permitting cryptocurrency exchange to operate, with china tightening the screws on their use.

Indicative of more and more global users willing to transact in them, the overall increasing acceptance of Bitcoin is because of the existence as also the continuously increasing influence of a parallel and the borderless economy which is usually out of control where any central authority puts the business of traditional card and merchant payment service providers at risk.   

The associated services linked to fiat currencies are bound to feel the heat from a time where everything was being dealt with in fiat currencies to now where an increasing portion is switching to the cryptocurrency dealings. 

The Bottom Line

With technological advances, the evolution of new offerings continues to emerge. This is a win-win situation achieved by traditional payment services adopting Bitcoin technology offering similar services using decades-old established brand names as the saying goes “if you can’t beat them, join them!”