4 ways businesses capitalize on crypto payments
We recently did a series of posts on Surewinner.com explaining how you can gamble online with Litecoin, Ethereum, and several other cryptocurrencies. We hope you will take the time to read those posts if you haven't done so already. They provide valuable information explaining how to gamble with cryptocurrencies both directly and indirectly.
This post will take that same discussion one step further by addressing businesses and how they capitalize on crypto payments. What you read here is as applicable to online casinos as it is to a London taxi service or an e-commerce retailer who sells clothing and accessories.
It will specifically discuss four ways that businesses capitalize on cryptocurrency payments. The first is a direct method while the other three are indirect. Any casino reviewed on our site that lets you play Mega Moolah with your bitcoins, litecoins, etc. utilizes one of these three methods.
Method #1: Direct transaction
This first method of capitalizing on crypto payments really encapsulates all of the benefits of cryptocurrencies themselves. The method involves a direct transaction between buyer and seller. In the case of online gambling, it is a direct transaction between the gambler and the casino operator. It is fast, simple, secure, and cheap.
Anyone familiar with the basic operation of Bitcoin will understand how this direct transaction occurs. Both the gambler and the site operator have digital wallets capable of accepting and sending digital coins. Let's say you have a digital wallet with bitcoins stored in it. Bitcoin is the only crypto platform you deal in, so you look for a casino that accepts bitcoin deposits. We list several of those sites here at MegaMoolah.com, by the way.
Let's say the casino you choose also has its own digital wallet. But rather than focusing exclusively on Bitcoin, the casino also accepts Ethereum, Litecoin, Bitcoin Cash, and Monero. All of those other coins are irrelevant to your transaction. As long as the site accepts bitcoins (BTC) you are good to go.
Making your deposit
Depositing BTC with a casino is a straightforward as can be. You navigate to the casino's banking page, scroll until you find either cryptocurrency or Bitcoin, and select that option. You are then presented with a basic online form to complete the deposit.
The most important thing to note here is that your deposit will occur as a push transaction. In other words, your wallet will push coin to the online casino's wallet. That is one of the benefits of cryptocurrency transactions. They are pushed rather than pulled.
If you were to make that same deposit via a direct transfer from your bank, you would be engaging in a pull transaction. Providing your bank information to the casino allows them to contact your bank to request money. That money is then pulled from your account through an electronic transaction.
Does it make a difference? Absolutely. Push transactions are more secure because they do not require you to reveal any personal information. You are not revealing bank account numbers, credit card numbers, or even your name and address.
Method #2: Indirect payment processing
The second method occurs in much the same way as a credit card transaction. Rather than having its own digital wallet and cryptocurrency account on the exchange, the merchant contracts with a payment processor to handle everything. This is the most common means of accepting cryptocurrency payments for point-of-sale (POS) transactions.
The business owner contracts with a payment processor to handle all crypto payments on his/her behalf. When a crypto payment is made, it goes through the processor first. The processor accepts the payment and then converts it into fiat which is then transferred to the business owner's bank account. At least that's the way it usually happens.
The purpose for this sort transaction is to protect merchants against constantly fluctuating cryptocurrency prices. Merchants pay a fee for this service, which is no different than paying a fee for credit card transactions. The extra amount is worth it in order to reach more potential customers and protect the bottom line.
Making a purchase
Exactly how a transaction of this sort takes place really depends on the merchant you are doing business with. One merchant might have a POS device that enables you to make a crypto payment just by touching your smartphone to it. Another merchant might have a device requiring you to enter your cryptocurrency information by typing on a screen.
Regardless of how the information is input, the end result is the same. Your coin goes to the transaction processor first. It is then converted to the merchant's preferred fiat and transferred to his or her bank account, less any fees or charges assessed.
Method #3: Indirect electronic payments
The third method of capitalizing on crypto payments is to contract with an electronic payment service that accepts digital coins. In our previous post we talked about using a service like Skrill. As you probably know, Skrill is one of the most recognized electronic payment systems in the world.
A merchant may contract with Skrill to receive payments from them. This allows them to market to people who prefer crypto payments by encouraging an indirect transaction. The merchant will not actually accept the coins, but Skrill will. So the customer can either use existing coins to make a Skrill payment or convert fiat to one of the seven cryptocurrencies the service supports.
Making a purchase
Practically speaking, this sort of transaction is slightly more complicated because it requires an extra step. The buyer would first choose what he or she is going to purchase from a merchant. Knowing the costs, he or she then logs in to a Skrill account and converts coins into fiat. Then the purchase can be made through Skrill in the same way the user might use PayPal or another payment service.
You can see why this method is indirect. The merchant does not actually accept cryptocurrency, but he/she can still do business with customers who dabble in cryptocurrency and have a Skrill account. It is not the best solution the world, but it is available to merchants who want to extend their reach without having to be directly involved in crypto.
Method #4: Convert crypto into cash via ATM
The fourth and final method is the least used of all. However, it is out there. It involves converting bitcoins or another supported cryptocurrency into cash using a crypto ATM. The buyer then uses the cash to make a purchase.
This seems to be at odds with the whole point of using cryptocurrency to buy and sell, but it is an option that really is necessary at this point. We really cannot expect merchants to get fully on board with crypto as long as prices remain so volatile. It's just too risky for the bottom line.
To accommodate both them and buyers, a small number of crypto-based businesses have started to offer ATMs in conjunction with payment processing services. Those companies install and maintain the ATMs at various retail locations. You can find them at airports, bars and restaurants, shopping centers, and so forth.
How the merchant benefits
Having an ATM on-site can be a big help to merchants, especially in cities like London, Seattle, and even Hong Kong. To better understand why, put yourself in the merchant's shoes. You obviously want to sell as much as you can to every customer who comes through your door. But what if customers come in, look around, and then leave because you do not accept crypto payments?
There are merchants today who don't like to accept credit card and debit card payments because they do not want to pay the transaction fees. But rather than losing out on customers who don't carry cash, they contract with a payment provider to install and maintain an ATM. Any customers who come in without cash can still use a credit or debit card at the ATM, thereby enabling them to purchase whatever they want.
A cryptocurrency ATM offers the same function. It offers customers looking to buy with crypto to still do so even at retail locations that don't accept crypto payments directly. Merchants benefit by accommodating a greater number of guests without having to pay the fees and charges that come with payment processing.
One of the four
Any business that caters to crypto-paying customers utilizes one of the four methods described here. The most commonly utilized are the first two. For example, any online gambling site that accepts crypto payments will either accept them directly or go through a payment processor.
As for you, you may not care one way or the other. Maybe your only goal is to find a gambling site that will let you play MegaMoolah.com using your bitcoins. What the casino operator does with your coins once he/she receives them really isn't an issue. That's fine, but at least now you know how merchants capitalize on crypto payments.
There may come a day when cryptocurrency overtakes fiat as the default way of paying for things. In the meantime though, merchants have to decide for themselves whether or not they want to accept crypto payments. Those that do can choose one of the four methods described above for capitalizing on those payments.