Payment Process
Proposed Standard Payment Process by IEEE SA (2020)
As seen in the Figure below, the standard payment process proposed by IEEE SA (2020) includes customers, wallets, exchanges, and merchants. It also accounts for opening a wallet with a know-your-customer check and additional know-your-transaction and anti-money-laundering checks for the payment.
The described process starts with the merchant sending payment instructions to the payment platform and querying an exchange rate. This exchange rate is frozen, and the customer receives the order information. The customer then transfers the cryptocurrency via QR code from his wallet. According to IEEE SA (2020), this transaction should undergo the mentioned checks before exchanging the payment to FIAT currency and settling.
Simplified Payment Process
Opposed to the payment process standard by IEEE, the graphic below shows a simplified process from the customer perspective to display the impact of wallets, payment gateways, and exchanges.
Therefore, the simplified process displays wallets, exchanges, and users as one ecosystem responsible for sending a specified amount of the chosen cryptocurrency.
![Own illustration [Florian Knöchel]](https://images.spr.so/cdn-cgi/imagedelivery/j42No7y-dcokJuNgXeA0ig/68eeb478-36f2-4b94-a153-995c01985241/Payment_Process_Calibri/w=3840,quality=80,fit=scale-down)
Usually, a QR code is displayed, including the receiving address and the amount, before the actual payment process begins. After posting the transaction to the network, it reaches its first confirmation once the transaction is included in a block.
Here the process splits and depends on if the merchant uses a third-party payment solution in the form of a payment gateway or employs his own.
An open-source solution does not offer an option to receive FIAT currency but omits any fees and third-party reliance. In this case, the merchant’s wallet directly receives the cryptocurrency as soon as the transaction is included in a block.
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Wallets, Exchanges, and Payment Gateways
Payment gateways, cryptocurrency wallets, and cryptocurrency exchanges are part of the payment ecosystem and all play a vital role.
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Wallets provide a user interface to track the status of cryptocurrency holdings and automate certain functions such as estimating the transaction fee and transaction confirmation time (Hileman & Rauchs, 2017). Therefore, a wallet acts like a bank account for cryptocurrencies.
Payment Gateways
Cryptocurrency payment gateways are payment processors enabling merchants to accept cryptocurrency payments easily. They act similar to credit card providers and offer services such as instantly converting cryptocurrencies into FIAT currencies and managing the vendor's wallet.
Within the scope of this work, 9 payment gateways and one open-source solution were examined in more detail.
| Name | Fees | Direct FIAT Conversion | Supported Cryptocurrencies |
|---|---|---|---|
Coinbase Commerce | 1% | 7 | |
Coingate | 1% | 70 | |
AlfaCoins | 0.9899999999999999% | 7 | |
BitPay | 1% | 13 | |
Confirmo | 0.8% | 2 | |
CoinPayments | 0.5% | 175 | |
Blockonomics | 1% | 2 | |
NOWPayments | 0.4% | 140 | |
Plisio | 0.5% | 8 | |
BTCPay Server | 0% | 5 |
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This fee difference is particularly relevant for merchants. The BTCPay Server omits all fees being an open-source solution but does not have the option to convert cryptocurrency payments directly into FIAT like others.
It is essential for payment gateways to achieve the highest possible adaption somehow and increase the number of accepting venues.
All examined payment processors offer APIs and various e-commerce plugins and support more than one cryptocurrency.
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