Welcome to the first article in a new PYMNTS series, “The Merchants Guide to Accepting Crypto: The Questions to Ask,” which aimed at helping merchants big and small, online and in-store, that want to accept crypto payments figure out what they need to know to move ahead.
Over seven articles, PYMNTS’ Karen Webster speaks with Stephen Pair, CEO of crypto-specific payments processor BitPay, which has been around 11 years, to come up with a list of the skills, experience and services to look for when choosing a payments provider once you’ve made the decision to accept cryptocurrencies.
One logical place to start, Pair said, is to find out where the processor is headquartered, and where it is licensed to do business.
“Merchants are going to be held to the regulatory requirements of their local jurisdiction,” Pair said. “So, I think it’s important for the processor to be headquartered in the same country as the merchant is.”
Barring that, Pair said, the baseline is that the processor should have a presence in that country and have both the licenses and the know-how to follow its regulations.
That’s particularly important because most merchants don’t have to ask those questions of their traditional payment platforms, Pair said. They’re used to dealing with banks and transfers between bank accounts — and it is generally the responsibility of the bank to adhere to those regulations.
“A lot of times, the merchants focus just on the usability and the user experience, which are important, but regulatory adherence and selecting a company that is subject to the same regulatory environment is also very important,” he said.
Another big one is being sure the processor has the liquidity and the balance sheet to cover several days’ worth of settlements in that merchant’s own fiat currency, Pair said.
While this is the kind of question merchants ought to be asking any type of acquirer, crypto processors are taking in crypto and paying out fiat. That means they must sell the digital assets and settle with the merchant. The problem, he said, is that in the volatile cryptocurrency market “delays in selling crypto or withdrawing from exchanges” are not unheard of. At times it can take several days, he added.
BitPay, Pair said, “keeps several weeks’ worth of liquidity on hand at all times, so that we can settle merchants the very next business day.”
Longevity Counts
Given that bitcoin was only launched in 2009, you’re not going to be dealing with crypto payments processors with 20 or 30 years in the business.
“In the crypto world, the companies are much younger,” said Pair, putting BitPay’s 11 years at the far end of the spectrum.
At the same time, crypto payments processors also need to have executives with long experience in traditional financial markets, he said.
“There’s a lot that we can learn from the legacy payments industry, especially when it comes to regulatory compliance and the needs and concerns of merchants,” Pair said. “You just can’t replace decades worth of experience with a few short years of working in the crypto world.”
By the same token, he added, you obviously need solid crypto experience as well.
“It’s a very different platform, a different technology, and there are different issues that people need to be aware of,” he said
First Focus
Focus is also important, Pair said, noting that a fair number of companies “are doing payment processing that’s just a side business for them,” such as exchanges, crypto lenders, and even decentralized finance (DeFi) products.
“Their core business is not really payments, so they don’t really give it the attention it deserves,” he said. “I think a lot of those companies just do the bare minimum. Maybe they don’t consider the entire life cycle of a payment, including refunds and managing a complete workflow around payments.”
When you’re accepting hundreds or thousands of payments per day, Pair added, “having a good platform to manage that is really critical.”
What it comes down to is customer service, he said. And the best way to judge that is by talking to companies that already work with the crypto payments processor.
Crypto payments are being used in all types of verticals, so it shouldn’t be too hard to find another client with a similar profile that can talk about its own experience, he said.
“If you don’t find a perfect fit, just look for good, reputable companies that are on the customer list of that processor, and talk to them” to see if they are happy and feel well-served, Pair advised.
A lot of the well-known companies are already taking crypto payments, he said, pointing to BitPay clients like Microsoft, AT&T and NewEgg.
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