How to find the best Crypto Payment Provider for your eCommerce

Source: https://hypebeast.com/2017/12/balenciaga-supermarket-shopper-bags

WARNING: This post is outdated. You can find the updated version on my website: https://www.messerblatt.com/blog.html

A partner of mine, let’s call him John, has been working in the management of a well-known shoe manufacturer for over 20 years. He pumps large parts of his wealth into stocks. When I asked him about his cryptocurrencies, he bluntly responded: „I only trade REAL money!“

That was 2 years ago. Since then, the number of crypto users in Germany alone has doubled from 5% to 10%. More than 18,000 companies worldwide utilize blockchain technology, and the global blockchain market is expected to crack the $23 billion mark in 2023. If cryptocurrencies are indeed not real money, most people don’t seem to care.

Are you ready to implement crypto payments into your eCommerce? What obstacles do you have to expect? How do you find the best provider? This article was written with the goal to answer these questions.

First, let’s talk about eCommerce customers. The psyma-report comes to the conclusion that 9% of customers are in possession of a cryptocurrency and another 66% at least KNOW cryptocurrencies. 25% state they have no knowledge about crypto. In general, we witness a clear correlation with the demographic factors gender, age and income. On the one hand, possession is significantly more common among men than among women. On the other hand, the proportion of those who own a cryptocurrency is higher the, younger the people are and the higher the income. For example, 19% of those who have high income (defined here as >€4,500 household net income) already own a cryptocurrency.

How to check if your eCommerce is ready for Crypto Payments

Your eCommerce is NOT ready for crypto payments if…

… Your financials cannot bear high volatilities. Bitcoin’s value fluctuates up and down 81% annually. Solana swings around 162% in height. For Ethereum, it’s 107%. Can your financials handle that?

… You cannot tolerate to see your customer’s transactions publicly available on the web. Market payments in cryptocurrencies are processed via public key cryptography. This means that the customer’s name and address are public on the blockchains. With scanners like Etherscan or explorer.solana, transactions can be tracked in web browsers. Therefore, you should avoid crypto payments if you sell sensitive goods. On the other hand, public-key cryptography enables new methods of data aggregation. More on this in the chapter How to use crypto payments in your eCommerce to erode your customers’ privacy and get filthy rich.

… You need to rely on well established payment methods that already overcame development phases and are covered by regulations. Cryptocurrencies are still emerging. In certain situations, you might miss the variety of options offered by traditional payment services.

… Your customers can’t stand transactions that take longer than a minute. Crypto payments take at least one minute to receive payment. With a credit card, on the other hand, it only takes a few seconds. This is of stronger disadvantage for in-store merchants with physical stores as for eCommerce, since in eCommerce, customers don’t need to wait in a store. Crypto payment providers are aware of this, that’s why they focus on eCommerce solutions.

On the other hand:

Your eCommerce is ready for crypto payments if…

… You are ready to take risks and rewards by reaching new customer segments. Several studies [1] confirm an excess demand on the part of coin owners. On average, 40% of respondents would like to see more options for crypto payments, as on average only 4% of stores offer crypto payments. A lot of customer potential remains untapped here.

… You want to reduce transaction fees. Almost every crypto payment provider charges a 1% fee per transaction. Compare this to the fees of established payment services like PayPal with 1.9% + 35 cents, Venmo with 3%, and credit cards up to 15%. This might sound like peanuts, but at transaction volumes of $1.000.000 you save about $19.000 compared to PayPal and $31.000 compared to Venmo.

… Your eCommerce operates globally. Because cryptocurrencies do. Anyone can use them to pay for goods and services regardless of geo-location.

… You have a strong customer support-department. A transaction in digital currency from wallet to wallet transfers the equivalent value instantly. There is no need for a payment guarantee for commerce, as the payment instrument is transferred and posted directly. Good for the store, bad for the customer: in the event of a complaint or failure to deliver, the customer has to rely on the merchant’s goodwill.

During our research, it became clear that the majority of efforts to establish crypto payments stem from the desire to attract new customers. Not a single eCommerce operator we asked made substantial gains in profit, but they adopted early. Now they are ahead of the game.

How to find the best Crypto Payment Provider for your eCommerce

Mike Novogratz from Galaxy Investments said in an interview: „Cryptocurrencies are not currencies. They are software.” He is right. Crypto is not printed by banks or institutions, instead, crypto emerges through the arrangement of hardware and algorithms in a way that enables consensus. Therefore we recommend to look at crypto through the lenses of a software developer, eyeing for code quality, robustness and user friendliness.

The software development company Scnsoft expects crypto payment integration to cost your company between $50,000 and $150,000.Starterstory calculates with $20,000 [2]. With amounts like that, integration must success.

Providers are a dime a dozen: Coingate, Bitpay, Forge Block, Shopify Gateway, GoUrl.io, ALFA Coins… We can’t tell who fits your eCommerce best, as we cannot cold guess your business context. But we have established criteria to differentiate the wheat from the chaff:

1. See if the crypto payment provider runs a blog on his website. What is the blog about? Does the blog actually inform you, or does it just boast about how amazing the company is? The company must show an intrinsic interest in giving you valuable insights.
2. Does the provider offer his software open source on github? It’s not tragic if he doesn’t, but if he does, you can use the insight features from github, and they can do quite a bit. See if the code is regularly extended, that is, if it is regularly commited. Look for the package dependencies. Basically, the fewer dependencies to other software, the slower and safer the progress. More dependencies mean more risks, but can speed up development.
3. Check the github profiles of the developers, i.e. the contributors. Research them like a headhunter. What else do they contribute besides the crypto payment software, and how often do they contribute? Do they have twitter? The developers should keep their software alive, commiting regularly. Keep your distance from deadbeats.
4. Your payment provider must be dead serious about security. PayPal has only been able to beat its competitors like Venmo, Billpoint, c2it, and PayDirect because PayPal invests about $300 million a year in securing payment processing. PayPal rewards a $30,000 bonus to anyone who finds a bug in the payment service, and its in-house financial fraud detection algorithm called IGOR became the Grant Panjandrum in financial security. Today, PayPal stands in the public eye as a good example of how to grow the business of online transactions in a way that appeals to the masses. Because it takes security seriously.

How to implement Crypto Payments in your eCommerce to erode your Customers’ Privacy and get filthy rich

Step 1: Integrate a crypto payment solution into your store.

Step 2: Take the shipping addresses of your customers and link them to the addresses of the associated crypto wallets.

Step 3: Use a blockchain explorer to find the crypto wallet addresses on the blockchain.

Step 4: Analyze at which times the crypto wallets transfer how much money to which addresses and where, until you have an all-encompassing understanding of your customers’ brains.

Step 5: Profit.

It amazes us how few people know this trick. In the traditional web, i.e web2, the possibilities of your data analytics are limited to the stores where you have data sovereignty. In the new web, i.e. web 3, you can trace all the transactions your users make, not only in your own stores, but in all the others as well. Basically, you can see all of your users’ crypto-purchasing behavior: From booking a hotel on Travala, purchasing mobile recharge cards on Coinsbees, to wooing sporting goods on Galaxus. You become the all seeing eye.

Takeaways

• If you are unsure which crypto payment service provider you want to choose, change your criteria to that of a software developer. Ranking providers by code quality, robustness and user-friendliness yield better decision making than looking at cryptocurrencies as mere equivalents of traditional currencies.
• Regulations will further concrete the specifics of crypto transactions in terms of law. At the same time, software developers refine the security aspects of crypto payment solutions, reducing your investment risk in the long term.
• Look for solutions that resemble PayPal in terms of security concerns, as security is the most import criteria for choosing a provider. The amount of transaction fees a solution charges is of second order, since almost every solution charges 1% fee.
• Blockchains enable new dimensions of data analytics, which you can leverage to better understand your customers from a 360° perspective.

Sources

[1] https://www.statista.com/chart/27070/cryptocurrency-use-selected-countries-over-time/
https://www.buybitcoinworldwide.com/cryptocurrency-statistics/
https://www.pymnts.com/study/paying-with-cryptocurrency-shopping-consumer-finance-digital-wallets/#wpcf7-f1329252-o1
https://assets.ctfassets.net/hfgyig42jimx/30h7FZ7l4mgSreL50EiEAf92719c05fe8275f0fccc39c76a02dbbc/cryptodotcom_worldpay_crypto_for_payments.pdf
https://www2.deloitte.com/content/dam/Deloitte/us/Documents/technology/us-cons-merchant-getting-ready-for-crypto.pdf
https://www.coinpayments.net/downloads/CryptoSpendersAndMerchantsByCoinPayments.pdf

[2] https://www.starterstory.com/ideas/ecommerce-crypto-payment-app-business/startup-costs