What’s old is new again – at least regarding payments. While cryptocurrency payments are rising, many businesses still rely on legacy payment processing methods. But which is better? Let’s look at some of the challenges and benefits of each.
From Crypto to DeFi – 5 Reasons Why Legacy Payment Processing is Doomed
It’s no secret that the world of finance is changing. digital payment processing platforms like PayPal, Venmo, and Cash App disrupt traditional banking. These apps are convenient, they’re user-friendly, and they’re quickly gaining adoption. But what happens when you add crypto into the mix?
When you start using crypto, you quickly realize that legacy payment processing platforms just don’t cut it anymore. Here are 5 reasons why crypto is taking over the payments industry:
High Fees
One of the biggest complaints about traditional payment processors like PayPal is the high transaction fees. With crypto, there are no middlemen or hidden fees. You can send and receive payments quickly and cheaply.
Slow Transfers
Another downside to traditional payment processors is the slow speed of transfers. With crypto, transfers are almost instant. This is especially important for international payments, which can often take days using a legacy processor.
Limited Functionality
One of the things that makes crypto so powerful is that it’s not limited to one use case like traditional fiat currency. Crypto can be used for everything from buying goods and services to earning interest on your savings. This flexibility is not possible with legacy payment processors.
Lack of Privacy
One of the most common concerns about legacy payment processors is the lack of privacy. When you use a service like PayPal, your personal information is stored on their servers and shared with third-party businesses. This is a major concern for many people who value their privacy. With crypto, your information is stored on the blockchain, which is secure and private.
Unstable Currencies
Another downside to using legacy payment processors is the instability of fiat currencies. Cryptocurrencies are not subject to inflationary pressures like fiat currencies, so their value remains stable over time. This makes them a much more attractive option for long-term saving and investing.
A Quick Primer on Crypto Payments
Crypto is taking over the payments industry because it offers a better user experience than legacy payment processing platforms. Traditional payment processors are plagued with high fees, slow transaction speeds, lack of privacy, unstable currencies, and limited functionality compared to cryptocurrency options. So, what are the challenges of using cryptocurrency for payment processing?
High Volatility
One of the biggest challenges of using cryptocurrency for payment processing is its high volatility. Since crypto prices can fluctuate wildly daily (or even hour to hour), it can be difficult to price goods and services denominated in crypto. This makes it hard for businesses to budget and forecast their income, leading to cash flow problems down the road.
Transaction Fees
Another challenge of using cryptocurrency for payment processing is transaction fees. When you make a payment with crypto, you have to pay a small fee to the network that processes the transaction. These fees can add up over time, eating into your profits.
Limited Acceptance
Finally, it’s important to note that not all businesses accept cryptocurrency as a form of payment. This means you might have to convert your crypto into fiat currency (e.g., USD) before making a purchase. While this is usually easy to do with a reputable exchange or wallet, it’s still an additional step that needs to be taken when making a payment with crypto.
What are the benefits of using cryptocurrency for payment processing?
Faster Payments
One of the biggest benefits of using cryptocurrency for payment processing is faster payments. Since crypto transactions are processed on a decentralized network (i.e., the blockchain), they can be completed much faster than traditional fiat transactions. This is especially helpful for businesses that need to make international payments, as there’s no need to wait for bank transfers to clear.
Lower Fees
As we mentioned before, transaction fees are necessary to make a crypto payment. However, these fees are typically much lower than standard bank transfer fees. This makes crypto an attractive option for businesses that need to send or receive large sums of money regularly.
Increased Security
Finally, it’s worth mentioning that crypto payments are more secure than traditional fiat payments. This is because all crypto transactions are encrypted and stored on a public ledger (i.e., the blockchain). This makes it very difficult (if not impossible) for hackers to steal your money or personal information.
Conclusion
The jury is still out on which payment processing system is better for businesses. Cryptocurrencies offer more security and transparency, but legacy systems are more widely accepted. Until the matter is settled and proponents of either system feel improvements, it will be up to business owners to decide what works best for them.
