Crypto payment firms see speed as key to merchant support

High-profile companies like Facebook, Square and PayPal have brought attention to using cryptocurrency for payments — but speed is more important than buzz in getting stores to view crypto as tender, according to a group of developers who are building connections to merchants.

"We may have a bitcoin worth $16,000, but that's not the measure of its usefulness to the payment system," said Angus Brown, co-founder of the Johannesburg, South Africa-based Centbee. "I look at it as a way to pay for something. It's about moving money cheaply."

CentBee's digital wallet has about 30,000 registered users that store, buy and make payments; it recently added the ability to withdraw bitcoin directly to a user's bank account and offers a Mint Money app to power remittances.

Like most of the companies trying to support cryptocurrency for retail payments, CentBee needs to address issues such as volatility and latency. Writing for PaymentsSource, payments consultant Collin Canright said the market of people who want to spend bitcoin for payments is very small because there are many better options that don't require using a deflationary store of value.

On Friday, Visa CEO Alfred Kelly told a CNBC forum that Visa's acquisition of aggregator Plaid would create a way to combine data and money, with the card brand's network enabling efficient transitions. Visa in 2019 partnered with Coinbase on a cryptocurrency debit card, supporting conversions between crypto and traditional currency. Most of the payment services via crypto involve conversions, with the stress on making that conversion faster or more reliable through a network effect.

CentBee's Brown contends speedier crypto payments can additionally come from Bitcoin SV, or a two-year-old public blockchain that's designed for enterprise users. Bitcoin SV resulted from "forking," or splitting, Bitcoin Cash, which was an earlier version of bitcoin designed for payments. The fork created a new protocol that's designed to work faster and with fewer fees.

Brown contends the cost for Bitcoin SV is $.0004 for an average transaction, versus the larger mining fees for traditional bitcoin. The speed reduces the volatility, which reduces the cost. "The problem with doing transactions in crypto is the value at the moment of that transaction. There's no volatility if the transaction is instant," Brown said

Another cryptocurrency payment company, Zumo, recently added Bitcoin SV to its ZumoKit, an SDK for merchants and other enterprises to add a digital currency/traditional currency payment combo. Zomu is also developing a debit card in the U.K. to support payments with digital currencies, and has partnered with nChain to build a cross-border payment gateway with discounted fees.

"To normalize crypto there needs to be changes in some of the restrictions that are holding crypto back," said Paul Roach, chief product officer of the Edinburgh, U.K.-based Zumo. "It's not just at a regulatory level but at a technical level. There's a latency or a time to complete transactions that can result in minutes or hours to get transactions through. That's problematic from a merchant's point of view."

Zumo works similar to Stripe or PayPal; the merchant adds a widget that allows consumers to pay with crypto and Zumo performs an exchange at the point of sale. The merchant doesn't have to touch crypto, a common concern that has kept cryptocurrency from being used for direct payments.

While most crypto payment services convert to traditional currency before the transaction reaches the merchant, it may not be necessary to convince merchants to accept crypto directly. The concern for Roach isn't as much about getting merchants to directly accept cryptocurrency as it is making it easy for consumers to use in a way that takes the merchant out of the equation.

By supporting crypto on the front end and performing the conversion in near-real time, Roach said it's an easier path for merchants to accept international e-commerce payments and easier for consumers to buy internationally using crypto and the underlying blockchain.

Facebook, PayPal and Square have also made moves in crypto that have drawn attention over the past year. PayPal recently announced consumers could use certain cryptocurrencies on its platform, while crypto trading has boosted Square's economic performance. The Facebook-affiliated Libra cryptocurrency will be a stablecoin that will be pegged to traditional currencies in different countries.

"PayPal and Square are looking at the payment side, but it will be a while because certain aspects of accepting payments need to be addressed by enterprises," said Daniel Lipschitz, CEO of the Ra'anana, HaMerkaz, Israel-based GAP600, adding these high-profile firms bring more attention to cryptocurrency payments, though at this point most people are aware of crypto, which isn't as novel as it was about 10 years ago.

GAP600 works with payment service providers and merchants to speed crypto transactions. It uses its own risk analysis to provide scoring for payments in an attempt to prevent crypto payment fraud such as "double spending" or using a cryptocurrency balance more than once.

The most likely path to crypto as a payment method would be as one option among a series of value-added blockchain-supported merchant services, Lipschitz said, adding these two general uses of blockchain are distinct currency.

Most crypto payments thus far have been for transactions to support cannabis, some fine-art purchases and gaming. Micro-payments are a possibility to extend cryptocurrency payments, given the potential to improve financial inclusion, according to Alex Argut, CEO of Handcash, a Madrid-based digital payments company.

Handcash uses a Bitcoin SV wallet to boost settlement speed for subscription payments. It recently partnered with Centi in an attempt to make bitcoin easier for merchants to use. Centi operates a platform that enables merchants to convert bitcoin payments to their bank accounts, or access traditional currency. It's designed to avoid bitcoin's volatility.

Handcash is also working through partnerships to enable contactless crypto payments via QR codes. As with most crypto payment services, there is still a conversion before the merchant receives the transaction.

"There are small fees for subscriptions, such as pay per view for videos," Argut said. "Micropayments can enable all kinds of new business models."