With so much hype about , businesses are beginning to understand the benefits of accepting payments — more secure transactions, an expansion of customer base, more affordable fees, avoiding chargebacks and faster funds availability.
Despite the explosive growth of e-commerce and increasing hype about , merchants still face four major hurdles when it comes to :
· Integration of payment
· Speed of payment
· Price volatility of
· to fiat settlement
#1 Integration of cryptocurrency payment into their business
Majority of the businesses do not have the necessary technical expertise to integrate into their business. Simply giving merchants an address that accepts payments is not a solution to this problem. Payment processing involves a lot more than just receiving payments. It includes invoicing, accountability, receipt acknowledgment, Instant Payment Notification (IPN), and everything else associated with a payment processor. Merchants need a simplified payment solution that can be integrated seamlessly into their system, on top of existing traditional and digital payment options.
Here are 2 real-life examples that explain why it doesn’t work if merchants simply use an address for accepting :
In example 1.1.1, let’s say an online airline booking website runs a $100 promotion for a Sydney round trip. Within 10 minutes, they received more than 1000 bookings, 900 of the paid to the same address: 12fqaTgrZ88ecSkxQ7ULKAbB1X. 100 of the did not complete the invoice payment process. How would the merchant confidently match a payment transaction to the correct booking invoice, given the fact that all 900 of them paid to the same address?
In example 1.1.2, let’s say a chain of restaurants start accepting . Would the business provide a for each of its restaurant? How would restaurant outlet managers match payment details confidently to an invoice in the Point of Sale? How would the business accountants know which transaction is paid for which meal, and at which restaurant outlet?
In examples 1.1.1 and 1.1.2, both the offline and online businesses will need to spend significant amount of manpower time and operation costs to ensure transactions can be managed within their sales and accounting operations. This becomes a problem for merchants looking to adopt in their business.
#2 Speed of cryptocurrency payment affects a business operation
Let’s start with a scenario. Imagine Bob purchased a cup of coffee and paid using . The network is currently congested, resulting in slower transaction confirmation. Now Bob is standing in front of the cashier, waiting for the payment to go through and there are 5 other waiting in queue to make their orders. The cashier can’t process the order because the payment has not been received on the merchant’s . What would you do, if you are the cashier?
Replicate this scenario and it becomes a serious problem when merchants adopt .
Figure 1.2.1 shows the transaction life cycle of a payment. Payments are only confirmed once the transaction has been included in a block. The transaction speed in which how fast a payment gets confirmation, is determined by a fee market and the memory pool. Lastly, payment confirmations are prioritized according to the amount of fees paid.
This is a fundamental limitation of how fast a transaction can be processed based on confirmations. The amount of time for each confirmation differs with different . For example, the average block time for is 10 minutes, Dash is 2.5 minutes, GroestlCoin is 1 minute.
To speed up transaction, Bob would need to pay more in fees so that his transaction gets prioritized for the next block. But again, that is not a solution to this problem.
#3 Price volatility of cryptocurrencies
Volatility is a function of time. The longer the time a free market remains in a merchant’s , less predictable becomes its price with respect to fiat. The price volatility in the market is one of the key factors that slows down merchant .
For the past decade, the speculative nature of makes it hard for merchants to accept it as payment without taking on price risks. Consumers anticipating a rise in the prices of their will also not adopt it as their preferred payment method.
Theoretically, price volatility problem is a result of free market speculation. However technically, there are ways in which we can explore to address this problem.
Referring to Figure 1.3.1. According to , the huge price volatility between Oct 2017 to Jun 2018 renders as an unrealistic means of payment in B2B and B2C markets. However, global market capitalization is currently experiencing relative stability since Dec 2018 and recent price stability has raised expectations that would become widely used for payments in 2019.
would be perceived less as a medium of stored value and speculation. Instead, would be adopted more as a form of payment in daily life transactions
#4 Cryptocurrency to fiat settlement
Most merchants will need to exchange to fiat money so that they can pay their business expenses with fiat. The problem is the merchant never knows how much fiat money he will receive in the end. Transactions through a is indirectly a conversion of to fiat currency based on the payment gateway’s conversion rate.
Due to the lack of economy of scale with a payment gateway, it leads to price inefficiency during conversion and merchants often incur losses on exchange rates unknowingly. Majority of the custodial payment gateways make extra profit by adding a spread percentage to the exchange rates.
Figure 1.4.1 shows 2 models on how custodial payment gateways profit from exchange rates. In Model 1, the percentage spread on exchange rate is passed on to the customer who is making the payment and merchant is paid in fiat currency. In Model 2, the percentage spread on exchange rate is applied during the withdrawal process which caused merchants to incur losses on exchange rates. Custodial payment solution providers have several models in which they can profit from the exchange rates.
Summary
The simple act of accepting could arguably be an abstract concept for businesses. To speed up merchant , we would need a payment solution that offers speed, lower fees and seamless integration from systems to settlement.
AtomicPay is a new class of decentralized and non-custodial payment solution for tomorrow’s global digital payments. It eliminates the involvement of a third-party financial intermediary, giving merchants full ownership of their funds whenever a customer pays them.
By eliminating third-party financial intermediary, transaction process will become simpler and faster. Transaction fees will be reduced from many unnecessary fees to a single flat processing fee. Our peer-to-peer architecture will also reduce the financial regulators’ control over .
and start accepting today.
Published at Sun, 27 Jan 2019 12:11:19 +0000
