When cryptocurrency payments processor BitPay set out to build a better customer payment experience for crypto wallets, one of the features included was the ability to send the transaction data back to its servers to ensure payment details were accurate and sufficient fees were applied to eliminate payment exceptions. Now, more than 100 wallets ensure the best customer payment experience.
The BitPay Protocol brings the more accurate payment technology it had developed for its own crypto wallet to an industry struggling with an unacceptably high industry-wide exception rate of as much as 10%.
That’s important in an industry in which transactions cannot be reversed after being written onto an uneditable and unalterable blockchain, and in which the miner fees paid for transactions can be unpredictable.
“It’s not great if their first experience is their wallet underpays the invoice or it overpays the invoice, and now they have to get a refund or redo the transaction,” said BitPay CEO Stephen Pair. “You want every payment to just work.”
The BitPay Protocol is used in the company’s own BitPay Wallet, as well as 100+ third-party wallets, which can offer users a better payment experience. This includes a better JSON-based payment protocol interface, significantly reducing the wallet development effort. It is compatible with tens of millions of crypto wallets including MetaMask, BitPay and Bitcoin.com, among others.
Doing the Math
The BitPay Protocol is aimed at several problems that center on transaction fees, Pair told PYMNTS’ Karen Webster.
“In most wallets, you can enter the amount you’re going to pay, and that opens up the opportunity to get it wrong,” Pair said. For one thing, wallets can have very different ways of calculating those network fees, and they aren’t always compatible.
“Some deducted from the amount you’re sending, some added into the amount you’re sending,” he said.
So, getting it wrong is fairly easy — particularly as the open wallet standard’s tech specs don’t include the ability “to specify the exact fee that should go on the transaction,” Pair said, adding that some wallets get as much as 10% of transactions wrong.
“We try really hard to give the user clear instructions … so that whatever idiosyncrasies that particular [wallet] app might have, we can explain to the user how to do it correctly,” he added.
A second problem is that the transaction fees required for cryptocurrency transactions are every bit as volatile as the price of the bitcoin, ether or other digital asset used for payment — and in some cases, more so if the blockchain is overtaxed, which is not uncommon with bitcoin and Ethereum. There’s also the fact that not all wallets accept all the same cryptocurrencies.
In the aftermath of bitcoin’s first big bull market in 2017, the rising congestion and fees were causing a lot of problems, Pair said.
“We had to figure out how to make sure that those transactions worked,” he said. “That led to us implementing the BitPay Protocol,” which allows BitPay servers to “tell the wallet exactly how to formulate that transaction.”
What Goes Wrong
There are different reasons these over- or under-payments happen, Pair explained.
“Sometimes it’s how they calculate fees that should go in the transaction, whether they take them out of the payment or add them to the payment,” he said. “Sometimes it’s because the law that wants you to enter a dollar amount for the transaction instead of the bitcoin amount.”
But the salient point is that the BitPay Protocol shields the merchant from the problem, Pair said, noting that everything happens behind the scenes.
“The wallet communicates with the servers requesting payment,” he said. “In our case, it would be BitPay. And then we can give the wallet back a list of requirements, including which currencies are accepted. And then the wallet takes that information and builds a transaction and hands it back to our servers without actually signing it.
“Then, our servers will give an acknowledgement, we’ll check the payment out and make sure they did it right — and then let the wallet know that they did it right and can go ahead and put the final signature on it and submit it.”
Those checks are something Pair said sets BitPay apart from other payment processors.
With a BitPay Protocol-compatible wallet, he said, users “know that when they scan to pay that invoice, it’s just going to do the right thing all the time. They don’t have to worry about it.”
Another feature of the BitPay Protocol is that it is compatible with Verifone point of sale (POS) terminals. It also was built to be adaptable, Pair said, noting that it can handle new requirements like the European Union’s Travel Rule, which requires the collection of personal data on some crypto transactions for anti-money laundering (AML) purposes.