What is the difference between fiat payment gateway and crypto payment gateway?

What happens in between when customers go to the payment page and when you receive the payment? How does the payment happen? You can thank payment gateways for this. Today, in addition to traditional fiat gateways, crypto payment processors are gaining popularity. We will discuss the differences these services have and the benefits of the crypto payment gateway.

What is a crypto payment gateway?

Crypto payment gateway is a service that allows merchants to accept cryptocurrency as a payment option. Thanks to crypto payment gateways, merchants can accept crypto payments on most e-commerce platforms, on any website, in a mobile app, or even offline. The service operates like traditional payment processors, but digital assets are accepted as a payment option instead of fiat currency. The crypto payment gateway performs the functions of processing and receiving crypto payments. Depending on the specific service, merchants can accept the most popular cryptocurrencies, such as Bitcoin, Ethereum, Dogecoin, and others, and less popular ones, such as Poodl Token, Axie Infinity, Kishu Inu, and others. Crypto payment gateways can be divided into custodial and non-custodial. In the first case, the merchants’ profit is deposited into their account, after which it is possible to initialize the withdrawal of funds to the wallet. On the other hand, non-custodial crypto payment gateways only process the payment and immediately send the profit to the merchant’s wallet. Crypto payment gateways allow accepting crypto for payment as easily as fiat currency, rewarding users with borderless, cost-effective, and almost instant transactions. In addition, merchants who wish to keep up with the times and offer their customers crypto as a payment method, but are not yet ready to fully plunge into the crypto space, can turn to the crypto payment gateway. The fact is that most crypto payment processors provide a crypto-to-fiat conversion feature, thanks to which you can charge cryptocurrency and settle in fiat.

What is a fiat payment gateway?

Fiat payment gateway is a portal that connects a bank account with the corresponding payment system. Through this software, payments made using bank cards and electronic wallets are verified and processed, resulting in these transactions being accepted or rejected. This happens every time you pay for goods or services, even when, for example, you simply pay with a bank card through a terminal in a grocery store. That is, the fiat payment gateway performs the functions of verification and subsequent processing of your bank card details. It ensures the acceptance of payments by online stores, as well as coordinates all possible settlements between the issuing bank, store, cardholder, or acquiring bank. It also performs several other important functions. For example, it supports the processing authorization requests and protocols in which it records all operations with the card. Unlike a crypto payment gateway that accepts both fiat and crypto payments, a fiat payment gateway allows you to accept only fiat (national currencies) for payment. The fiat payment gateway transmits transaction information virtually via web-based payment services and APIs or personally via a payment terminal.

This payment service allows various modes of online transactions, such as Internet banking, credit and debit cards, UPI (Unified Payment Interface), and other digital wallets.

These services encrypt important information (for example, customers’ bank card data). They also help your site meet certain standards by ensuring secure transactions between you and customers.

What are the benefits of crypto payment gateways?

Fast and borderless

Crypto payments are famous for their almost instantaneous transactions. All this is thanks to blockchain or DAG technology, which allows you to make quick transactions regardless of the client’s location and the merchant’s location.

Depending on the specific cryptocurrency, its architecture, protocol, and so on, the payment can reach the merchant within a few seconds or 10 minutes. If we are talking about non-custodial crypto payment gateways that do not store the seller’s profit, in this case, the merchant receives payment for the goods or services directly to the wallet as soon as the payment is processed by the blockchain network, and the gateway. In the case of fiat payment gateways, merchants often need to wait 7-14 days to receive payments to their accounts. They act as an intermediary, processing the information entered when placing an order, performing authorization, and transferring payments to sellers. All this significantly reduces the efficiency of the business and can lead to losses.

Censorship resistance

Crypto is meant to be the currency of free people. That is, it is enough for users to create a crypto wallet to start making financial transactions. At the same time, due to the privacy of blockchain technology, payments can be accepted even among illegal business owners.

Because of this feature of the blockchain, cryptocurrencies have become extremely popular on the black market and among other non-eligible businesses. On the other hand, fiat payment providers may not work with your type of business and refuse to integrate. Each fiat payment gateway has its list of prohibited activities. It may include online casinos, shops with tobacco and alcohol products, goods and services 18+, forex exchanges, MLM companies, etc.

Low fees

In addition to speed and borderless payments, crypto also provides competitively low network fees. The point is in the absence of a huge number of intermediaries. In the case of crypto payment, your client pays a small network fee when paying for your goods and services, and you pay a service fee to the crypto payment gateway.

Thus, we can say that in the case of a crypto payment gateway, you have only one intermediary, which significantly facilitates the payment process and improves your customers’ user experience. On the other hand, in the case of a fiat payment gateway, several actors participate in the payment process (seller, eminent bank, acquirer bank, processing center, international payment system, buyer), and it consists of a large number of small transactions. Each listed intermediary charges a small commission, which eventually adds up to a significant amount.

Safety

Blockchain technology, despite its privacy, is also transparent. Anyone who knows the addresses of the sender’s and recipient’s wallets can check at what time the transaction occurred and what amount was sent. In addition, crypto transactions are irreversible (so check wallet addresses carefully), which protects merchants from chargeback fraud. In the case of fiat payment gateways, there are often cases when payments are lost. Money is debited from the buyer’s card but does not come to the merchant’s account. Accordingly, the client remains without money and goods, and you are without money and with a panicked client. The transparency of the blockchain completely eliminates such incidents.

Crypto vs. Fiat Payment Gateways

Both crypto and fiat payment gateway pursue a single goal: allowing merchants to accept payment for their goods or services. Nevertheless, the services in question do this differently, and various payment instruments are at their core. Choosing which payment gateway is most suitable for your business, you should carefully analyze them.

Crypto Payment Gateway

• Censorship-resistant
• Payment within 1 sec – 10 minutes
• One intermediary
• Low fees
• Secure and transparent 

Fiat Payment Gateway

• Third-party control
• Payment within 1 sec – 14 days
• More than three intermediaries
• Expensive fees
• Risks of fraud

Conclusion

Payment gateways act as an intermediary, processing the information entered when placing an order, performing authorization, and transferring payments to sellers. Therefore, it is necessary to approach the choice of such a service with special care.