Do you want to know how a Bitcoin payment processor works? If so, here’s a guide on Bitcoin payment gateway and why your business should use one.
Customers are undoubtedly becoming more crypto-savvy. Therefore, more businesses have to embrace Bitcoin payment to attract more customers. A Bitcoin payment processor or gateway is a transaction facilitator between the customer and the merchant. A business owner uses a Bitcoin payment gateway to accept and process crypto payments. Furthermore, they may use platforms like biticodes to get the most out of their investment through bitcoin trading.
Apart from providing a competitive advantage, a Bitcoin payment process enables a crypto-friendly company to enjoy numerous benefits, including protection against chargeback fraud. But how does a Bitcoin payment processor work?
How Does it work?
The first crucial aspect of Bitcoin transactions is that no financial institution or government owns this cryptocurrency. It is a decentralized virtual or electronic currency, meaning one party can send it to another without a third party. A digital ledger or the blockchain records Bitcoin transactions.
When paying with Bitcoin, a customer must have a crypto wallet, either a software or hardware wallet. A software wallet is primarily a computer program that stores the private keys of your Bitcoin addresses. Hardware wallets are physical devices that secure your private keys offline. Once the customer has set up their wallet, they can proceed with making a payment.
The customer initiates a payment by sending the required amount of Bitcoin to the company’s wallet. The system broadcasts the transaction to the network made up of nodes. Miners validate the transaction and add it to the blockchain. The entire process takes about 10 minutes. After including the crypto transaction into a block, it is considered complete, and the customer will receive a confirmation.
Some businesses require more than one confirmation before they release the goods or services. For instance, if you’re buying expensive jewelry, the merchant might wait for six confirmations, which can take up to an hour.
Bitcoin wallets can generate multiple addresses, and businesses often display a QR code containing their wallet address. Customers can use their Bitcoin wallet app to scan the QR code and send the required amount of crypto.
Crypto payments are usually irreversible, but some payment processors offer a custodial service that can help businesses refund customers in case of a dispute. Once a Bitcoin payment processor receives the payment, they convert it to the local fiat currency and deposit it into the merchant’s account.
The entire conversion and transfer process can take one to three days faster than traditional payment methods, such as wire transfers.
Why Use a Bitcoin Payment Processor?
The main reason is that crypto provides a competitive advantage. Being one of the first companies to accept Bitcoin, you can attract new customers looking for businesses that accept this form of payment. Other benefits of a Bitcoin payment processor are as follows:
● Lower Fees: Credit card companies charge high fees, which can affect your profits. On the other hand, Bitcoin transaction fees are low and often negligible.
● Protection from Fraud: When you accept credit card payments, you risk fraudsters making chargebacks. With Bitcoin, transactions are immutable and irreversible.
● Borderless Payments: Bitcoin is a global currency that anyone in any part of the world can use. And this enables businesses to sell their products and services to customers worldwide faster.
● Fast Payments: Bitcoin payments are fast and settled within one to three days, making them much faster than wire transfers.
With that in mind, it’s crucial to pick a reliable and professional Bitcoin payment processor. While they all serve the same purpose, Bitcoin payment gateways aren’t the same. Therefore, research the available options to pick a crypto payment processor that suits your needs and ensures the safety of your funds.