Crypto Payment Processors vs. Traditional Payment Processors: What’s the Difference?
Crypto payment processors offer businesses a secure, efficient, and modern solution for processing digital transactions. On the other hand, traditional payment processors operate within centralized banking systems and require debit cards, and credit cards may require cash too. Conventional payment processors have adapted and evolved since the smartphone revolution. Now, most traditional payment processors are compatible with mobile and are therefore an attractive option for businesses. However, the top crypto payment processors are more advanced and beneficial because they offer multiple cryptocurrencies and stablecoins. It is important to compare the key benefits of both for the larger well-being of the business community in the world.
Advantages of Crypto Payment Gateway
The several advantages of crypto payment gateways are the main reasons why people prefer them over traditional payment gateways.
- Offers Flexible Payment Options
The crypto payment processors are renowned for offering flexible multiple cryptocurrency payment options. The clients can choose from a wide range of options through APIs and plugins. The merchants can configure supported cryptocurrencies and set up automatic conversion options. The wallets allow flexibility, and businesses can accept digital payments without directly managing blockchain transactions.
- Lower Transaction Costs
Crypto payment processors usually have lower transaction costs compared to traditional payment systems. The main reason is that these gateways do not require intermediaries such as banks and credit card companies. The cost-effectiveness will ensure that cryptocurrency payments will become an attractive option for merchants to maximize profitability. Cryptocurrency trading bots can further bring down costs by optimizing transactions and automating trades.
- Quicker Transactions
The crypto payment gateways are faster than traditional payment systems. It is particularly beneficial for global transactions and ensures smooth, instantaneous transfers. Unlike the traditional payment system, one does not need to wait for long hours. The transactions take a few minutes and therefore enhance both user experience and liquidity.
- Security Apparatus is Superior
Online transactions have become riskier than ever before. Although banks have improved their security systems, they still lag behind blockchain encryption. Blockchain technology makes transactions irreversible and tamper-proof. The financial risks, therefore, are substantially owing to this superior security apparatus.
- Privacy and Trust
Cryptocurrency transactions have a higher degree of privacy and trust than traditional methods. The risk of data breaches is minimal, and many exchanges are designed for privacy-conscious consumers. This is one of the reasons that many people are now preferring payment gateways over traditional payment systems. In traditional banking, the degree of privacy is lower since all bank officials can witness records of all transactions.
- Unbanked Market Can Also Avail
The use of crypto payment gateways is not limited to people who have bank accounts. The salient feature of this gateway is that the unbanked and underbanked segments of the population can benefit from it. According to the World Economic Forum, there are 1.4 billion unbanked people in the world. The businesses using such gateways can expand their businesses faster in areas that have limited financial infrastructure. The integration of cryptocurrencies can also provide a wide range of opportunities.
Traditional Payment Processors
Traditional payment systems or processors rely upon banks for carrying out transactional operations. The operational mechanisms and key features are essential for evaluating effectiveness compared to crypto payment processors.
Common Operational Processes of Traditional Payment Gateways
Traditional payment gateways are more structured than crypto payment processors. The system involves several intermediaries and can cause potential delays and extra fees. These include the following:
- Initiation
The process typically begins when a customer enters their credit or debit card details on the platform. The details are validated and encrypted to enhance security and reduce fraud.
- Authentication and authorization
The payment gateways often use encrypted payment information and the customer’s issuing bank plays a lead role in authentication. The card networks like Visa and MasterCard can verify the legitimacy of transactions and check fund sufficiency.
- Settlement
Once the transaction undergoes approval by the bank, it enters the settlement phase. The standard practice is that within 24-48 hours, the funds are transferred from the customer’s account to the merchant’s account.
Major Limitations of Traditional Payment Processors
The traditional payment gateways have certain limitations when compared with crypto payment processors.
- Geographical Restrictions
The traditional payment processors have geographical limitations, unlike crypto payment processors. These do not support global transactions and operate only during banking hours. Banking hours also vary and, therefore, are restrictive for business scalability.
- Higher Transactional Charges
The operational costs of traditional payment gateways are usually higher, and they charge from 2 to 3.5%, depending on the bank. Many banks limit the number of transactions one can carry out within a month and deduct charges for crossing the limit.
- Processing Time is Slower
Crypto payment processors are much faster than traditional payment processing systems. The settlement periods vary from 24 to 48 hours. Therefore, under certain circumstances, it can adversely affect the cash flow of businesses.
- Miscellaneous Charges
All traditional payment systems have chargeback risks and a string of hidden charges that can substantially lead to monetary wastage for the customers.
Bottom Line
The crypto payment gateways are much more advanced than traditional payment gateways. The businesses that rely upon crypto gateways can carry out transactions faster and need not worry about geographical borders. Additionally, the banks do not play any major role in these gateways, and businesses can therefore use these to enter unbanked territories. The settlement time is usually faster and more secure. The integration of blockchain technology is one of the prime reasons why traditional payment gateways are less advantageous. In terms of integration, the crypto payment processors have an edge over the traditional ones. The solutions have hosted payment pages for a faster, hassle-free setup.
