What is a Bitcoin payment processor?

When a merchant decides to accept Bitcoin and cryptocurrencies in their store, they want to attract new customers.

As a dealer, you want to take care of your own core competence. This lies in the sale of goods and services via the Internet. The core competence of a payment provider lies in the payment processing between the customer and the merchant.

Task of a Bitcoin payment provider

For technical payment processing, the Bitcoin payment method is included in the payment methods selection page.

The Bitcoin payment provider receives the purchase amount in Euro from the store software and requests the current exchange rate between Euro and Bitcoin from a Bitcoin exchange.

At the same time, a new Bitcoin address will be generated, which will be used exclusively for this order. Together with the determined Bitcoin amount, this address, in the form of a QR code, is presented to the buyer on the store’s website.

The page displayed with the QR code is called a payment page. This payment page can be in the design of the Bitcoin payment provider, as well as in the design of the store.

The payment page usually also displays an expiring clock, which indicates how long this transaction is valid. This takes into account the volatility of the bitcoin price. As a rule, the validity is limited to 15 minutes. Within this period, the conversion rate is guaranteed to the customer. After this time the exchange rate is recalculated.

To detect whether the customer has executed the payment, the Bitcoin payment provider monitors the mempool or blockchain.

When the transaction is detected in the mempool, the Payment Page display changes and the buyer is notified that the payment is on its way:

Confirmation of successful payment by the Bitcoin payment provider

The Bitcoin payment provider will handle the assignment of the incoming payment with the order in the online store. After successful payment, the feedback is sent to the store or to the merchandise management system to provide the delivery of the goods or services.

Technical integration and store modules

The technical integration of the payment method Bitcoin and other cryptocurrencies is just as easy as the integration of other payment methods.

Bitcoin payment providers provide corresponding API interfaces and store modules for the most common store software solutions.

Anyone who has already technically integrated payment systems into their online store will have no problems whatsoever with the integration of Bitcoin.

Accounting and volatility

The high volatility of the bitcoin price and how to incorporate bitcoin into your accounting work as a deterrent for some traders at first.

But this problem is solved by numerous Bitcoin payment providers in the form that a settlement and payment guarantee is provided in euros.

If the product purchased in a store costs the end customer €50, the store operator receives this amount, after deducting a service fee, paid out in euros.

Due to the payment guarantee, any price changes are borne by the Bitcoin payment provider.

As with credit card and Paypal settlements, the merchant receives a statement from the Bitcoin payment provider about the Bitcoin sales including a payout to the bank account. This means that there is no problem in recording the sales made in the accounts and there is no risk of volatility.

Accept additional cryptocurrencies

Bitcoin is the largest, best known and most widely used cryptocurrency. If you have decided to accept cryptocurrencies in your store, there is no getting around Bitcoin.

However, there are numerous other cryptocurrencies which also specialize in payment processing.

The most important coins are: Bitcoin, Bitcoin Cash, Dash, Litecoin, Lightning and Ethereum. The individual differences are mainly technical and have individual advantages and disadvantages for individual business models.

At this point, it can be said that it can be beneficial for a trader to offer a few more cryptocurrencies for their customers besides Bitcoin. But the selection should also not be too extensive, so as not to confuse customers more.

If you offer a special product that is specifically aimed at a tech-savvy target group, you can offer a wider selection. If the products are aimed primarily at the mass market, a reduced and simplified selection is recommended.

Fees

On the part of Bitcoin payment providers, two types of fees are usually charged. One fee is for providing technical payment processing and ranges from 0.5% to 1% of the sales volume (clearing volume).

A second fee is a settlement fee. The withdrawal fee is composed of the withdrawal method fee and the conversion fee.

The merchant’s balance with the Bitcoin payment provider is maintained in the respective cryptocurrency. One can have this credit paid out as cryptocurrency or also in euros (fiat currency) to his own bank account.

A conversion fee is then charged for converting the crypto balance into euros.

Depending on the desired withdrawal method, different fees may also be charged. As a rule, Bitcoin and bank transfer are offered as withdrawal methods. However, some Bitcoin payment providers also offer withdrawals to a PayPal account or to a debit card.

The conversion fee and the withdrawal method fee are usually referred to collectively as the withdrawal fee.

The withdrawal fee in cryptocurrencies are free of charge with all providers. Fees of 1% to 2% are charged for withdrawals to a bank account. Payouts to PayPal or to a debit card are slightly higher.

Legitimation check

In order to accept payments in his store, the merchant must provide documentation about his company. This so-called legitimation check and KYC check also includes a check of the business model in addition to the business documents. A procedure that every merchant already knows from the acceptance procedure for credit card or PayPal.

The same verification requirements are imposed on merchants by Bitcoin payment providers. If a trader wishes to receive a payout in fiat to his bank account, this verification is required by law.

Previously, the verification was limited to the traders who wanted a payout in fiat currencies and it was waived for payouts via cryptocurrencies.

In the meantime, it has become accepted that an audit is carried out at all dealers. Only BtcPayServer does not require any verification.

All other payment providers perform the checks, and the amount of documentation submitted is linked to turnover and payout limits.

Provider comparison

Provider comparison

What requirements should the Bitcoin payment provider meet?

• Which cryptocurrencies do I want to accept?
• Is a store module offered for my online store?
• Do I want a payout in Bitcoin or in Euro to my bank account?
• What are the costs for me as a trader?

There are now a variety of Bitcoin payment providers that support cryptocurrency payment processing. There are globally active suppliers and niche suppliers that have focused on special applications.

The main Bitcoin payment providers for European merchants are briefly presented in the following list.

Bitpay

Bitpay is one of the largest and most well-known Bitcoin payment providers and is used by most merchants worldwide. Bitpay supports the cryptocurrencies Bitcoin and Bitcoin Cash and pays out sales either in Bitcoin or in euros.

The fees at Bitpay are 1% of the turnover and no further fee is charged for the withdrawal.

BitPay only accepts payments that support the BIP70 protocol. Since not all Bitcoin wallets support this protocol, payers using these wallets experience payment interruptions.

Similarly, BitPay has announced that it will withdraw from the German market from 2020. As of this date, dealers from Germany will no longer be accepted. This is justified via the unclear legal situation in Germany regarding Bitcoin’s custody regulations for its traders.

Merchants who have already used BitPay as a payment provider can very easily switch to the BTCPay Server solution (see below), as it relies on the same technical API interface.

Coinpayments

Coinpayments is the provider with the most extensive selection of accepted cryptocurrencies. If you want to offer your customers an almost complete selection of all available cryptocurrencies, you will find what you are looking for at Coinpayments.

The payout is also made exclusively in cryptocurrencies. Payout to a bank account in Euro is not possible.

One can have the incoming payments from the various currencies changed into bitcoin, for example, and then have their sales paid out in bitcoin.

CoinGate

Coingate also impresses with an extensive selection of over 50 different cryptocurrencies. All cryptocurrencies relevant for payment processing are supported. It is especially worth mentioning that Coingate supports Lightning payments.

OpenNode

OpenNode specializes in payment processing for Bitcoin and Lightning payments. Especially in the area of Lightning payments, OpenNode has earned a good reputation and convinces with industry-specific solutions.

BTCPay Server / Coincharge

With the BTCPay Server you are your own payment provider. It is a free open source software that you can install and use yourself on your server. Accordingly, no legitimation check is required and no fees are incurred.

The BTCPay server supports Bitcoin and Lightning payment methods. Other payment methods can be added optionally.

Coincharge implements its projects based on the open source technology of the BTCPay server. A brief summary of which applications can be implemented with the help of the BTCPay Server and how you can receive the payout amount in euros if required can be found in the article: Bitcoin Payment Provider vs. BTCPay Server.

Summary

For a complete listing and detailed description of other Bitcoin payment providers, please visit Coinpage’s Payment Providers page.

In summary, a Bitcoin payment processor provides the following services to a merchant:

• technical interface and store modules
• technical processing of bitcoin payment
• automatic conversion of the Euro price into the respective Bitcoin price based on the current Bitcoin rate
• Bitcoin payment pages for customer-friendly payment processing
• the payment page incl. an individual Bitcoin address per payment transaction and in QR format.
• Monitoring the receipt of bitcoin at the bitcoin transaction address.
• Settlement and payment to the bank account of the trader in his desired currency e.g. Euro, CHF, USD or also in Bitcoin