Welcome to “The Merchants Guide to Accepting Crypto: The Questions to Ask,” a new PYMNTS series aimed at helping merchants big and small, online and in-store, who want to accept crypto payments figure out what they need to know to move ahead.
In this fourth installment of the seven-part series, PYMNTS spoke with Jagruti Solanki, CFO of crypto payments technology firm BitPay, about the types of questions that companies considering adding a crypto payments processor partner are currently asking.
Over the last 10 months or so, the company has seen “a lot more sophisticated inquiries,” Solanki recently told PYMNTS. “Several years back, I would say merchants and businesses were asking the question, ‘Why crypto?’”
It’s past that point now, Solanki said. Now, it’s more in the line of, “What kinds of questions should I be asking?”
Merchants are saying, “OK, I’ve accepted the fact that I’ve got to do this,” she said. “What kind of due diligence do we need to be doing? What is it that the company we are looking to partner with to offer crypto needs to have?”
Solanki added there is “a lot more focus on understanding the onboarding process” and becoming “comfortable working with companies that offer crypto solutions” for payments.
That may have been inevitable as crypto turned from an obscure financial niche to a mainstream phenomenon discussed by financial journalists and purchased by a growing swath of consumers over the past couple of years.
However, that doesn’t mean that there isn’t still a fair amount of hand-holding needed at first, Solanki said. While that does include things like creating an account and handling the first transaction, it also includes more mature questions like how the partner handles the know your customer (KYC) checks that it needs to remain compliant with anti-money laundering (AML) laws and regulations.
Who Wants It?
While the customers paying with crypto do skew young, merchants are finding that “having crypto as a checkout option on the website is pretty popular.”
More than that, there are signs that it’s popular with a high-income demographic. Despite an uncertain economy and a 65% decline in bitcoin’s price, “we have seen a pretty significant increase in spending patterns for high-ticket luxury items,” she said. “Those continue to be popular, and there are customers out there who are looking to pay in crypto for those high-ticket items.”
That matches well with what PYMNTS 2022 U.S Crypto Consumer study found. While 28% of consumers had a positive view of crypto as a payments technology, that rose to 32% among high-income consumers and 48% among millennials.
What to Ask For
Another key feature merchants should be looking for, Solanki said, is that the provider can make it easy for them to accept crypto.
While BitPay can settle merchants’ accounts with whatever mix of crypto and fiat currency they want, taking all fiat — in dollars or eight other currencies — remains the safest way to go, she noted. In the U.S., that’s largely due to the tax implications of accepting crypto, which range from capital gains implications to issues with a law that isn’t even written yet.
That makes it “super easy … from an accounting, tax and audit standpoint, because they don’t see crypto on their balance sheet,” Solanki added.
Areas they should be looking at and asking questions about include making “sure that the company that they work with is financially stable, that it has sufficient cash reserves on their balance sheet to be able to make timely settlements,” regardless of the crypto market’s volatility.
On top of that are the provider’s options for settlement.
“Is it ACH? Is it wire … do they have same-day settlement features with that company?” Solanski said. “What foreign currencies do they support and how many cryptocurrencies are being supported? Do they have the ability to track where their transaction is in the process? Is a sufficient amount of compliance being done to make sure the company is meeting its regulatory requirements?”
And, of course, there are fees. These come in two varieties: the ones merchants pay crypto processors — BitPay charges a standard 1% — and the transaction fees that crypto buyers will need to pay.
That latter question depends heavily on the cryptocurrency being spent, Solanki said. Bitcoin is cheaper than ether, she said, but there are some cryptos out there that have very low transaction fees — and are much friendlier for payments as a result.
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