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Posted: Chad Zollinger|August 29th, 2018

Point of Sale

What the Experts Are Saying about Cryptocurrency in Payment Processing


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Written by Chad Zollinger
Chad Allen Zollinger is a Content Management Specialist for Best Company. Majoring in Writing Studies, Chad is an avid reader, a lifelong writer, and once completed the Rubik's Cube in 34 seconds.

Owners of small businesses, big businesses, and every business in between will have heard of cryptocurrency by now and wondered whether it will make an active appearance in their respective industries. The payment processing industry is not an exception. The problem, or benefit, of cryptocurrency likely lies in its complexity — so let’s see what the experts had to say when we asked them these questions: Where does cryptocurrency/blockchain fit into the payment processing industry? Will we see cryptocurrency options in payment processing and POS systems like Clover, powered by iPayment? If it does have an effect on the payments industry, will it be positive or negative? Are there companies that have already begun integrating crypto and blockchain technology? Take a look at what industry experts have to say about the subject:

Dean Anastos, CEO at Blockchain Developers
"Blockchain has offered an alternate form of payment. For some industries, this is very valuable like for the cannabis industry. The cannabis industry has a hard time with accessing banks and cryptocurrency on blockchains is changing that. Payment processing companies will begin to accept it as crypto begins to go mainstream. . .payment services such as Stripe have now accepted bitcoin. The downside currently is the volatility in cryptocurrencies. Over time this will change as more people use crypto and the prices stabilize."

Ted Bissell, Global Director of Digital Consulting at Axis Corporate
“Blockchain serves as the underlying technology for most of the major virtual currencies, and their explosive growth has already forced blockchain into a role in the payments world. Other than situations where payment gateways enable merchants to accept virtual currency compensation for goods and services, blockchain technology has not yet deeply penetrated traditional payments. Blockchain is, however, demonstrating the substantial cost savings potential using distributed, secure technology rather than traditional, hub-and-spoke networks carrying the majority of payments at present. We are at the beginning of a trend where blockchain will ooze into traditional payments.”

Anatoliy Okhotnikov, Head of Engineering and Cryptocurrency Expert at Softjourn, Inc.
“Blockchain and cryptocurrencies affect the payment processing industry in two major ways: a) accept cryptocurrency as a payment method; b) use the distributed ledger technology for payment processing. Currently there is a small number of regular payment processors which offer cryptocurrency as a payment method and this number is declining. For example, Stripe had announced that support for Bitcoin payments is ending April 23, 2018. And there is a greater number of specialized cryptocurrency processors, like Cashila or Coinbase, CoinGate, etc. But the problem is quite common — cryptocurrency volatility. Its volatility prevents mass adoption and makes some bigger merchants (like Microsoft, Steam, etc.) drop the crypto payments.”

There are two ways to address this problem: immediate conversion of cryptocurrency to fiat currency or merchants have to hold onto crypto to sell it at the desired rate. And the trend is going down. A much more successful use case is the blockchain distributed ledger technology for transaction processing and settlement. It had already significantly affected the industry but on the higher level. Regular merchant account providers can do a business with its customer in regular and stable manner, but use blockchain behind the scenes to do the cross-border settlements and payment processing. For example, JPMorgan launches payments network using blockchain technology. Just recently we saw with Ripple's XRP coin hitting a high of $3.84, the company's co-founder and executive chairman, Chris Larsen, is now worth about $59.9 billion on paper.

Mastercard seeks the patent for instant blockchain payments processing. Last summer seven of Europe’s largest banks (Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and Unicredit) formed the Digital Trade Chain Consortium to build and operate a new trade finance platform based on IBM blockchain powered by Hyperledger Fabric. Their aim is to improve domestic and cross-border service trade payments for small and medium enterprises (SMEs) in Europe. The payment industry is on the move and it moves toward the distributed ledger technology for instant payment processing, with built-in KYC, AML, etc.”

Geoffrey Scott, Payments Consultant for PayMotile
“For now, blockchain doesn't have a big role in the payment processing world. However, it does serve as a novel solution to the woes of marijuana and CBD merchants who struggle to find banks willing to accept their business.

For instance, Motile is partnered with a company that uses Dash (a form of cryptocurrency) to process payments specifically for such merchants. The way it works is like this:
1) Dash is purchased via ACH
2) Dash is used to buy the product
3) The sale is recorded in the ledger — no physical cash required (and no worries about money laundering)

This is all done in a matter of seconds. For now, not many merchant service providers offer blockchain solutions, but this is rapidly changing. Employing cryptocurrency and voucher wallets as ways to process non-traditional currency is a method that's only going to grow as more people invest in blockchain. With the crypto boom in full swing, it's no surprise this is happening — and enterprising payment processors are getting with the picture.”

The Big Picture
In the end, traditional payment processing companies will survive, and possibly even thrive; they have a firm grasp on the market and are known to adapt with new technologies. You don’t have to take my word for it though. Many industry experts agree that although cryptocurrency will affect many industries, it isn’t likely to dominate the established market shares of each industry, even merchant services.

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