Are Bitcoin Payment Services Similar to Credit Cards?

Bitcoin, the most popular cryptocurrency, has been dubbed by some as the secure money of the Internet. Using proper caution, one can make or receive payments to anyone without revealing any sensitive information linked to their bitcoin accounts or wallets. Other cryptocurrencies like Litecoin and Ripple are also seeing a surge in transactions.

Riding high on the increasing acceptance of bitcoin and other virtual currencies, many businesses have started offering payment-related services that make and receive payments in crypto.

Thanks to these bitcoin payment services, you can pay for a cup of coffee at the corner coffee shop by scanning the shop’s QR code on your mobile phone, or purchase a high-end laptop from a large and established corporation like Dell by making payments in bitcoin.

This article explains how bitcoin payment services work, the advantages, associated costs that users should be aware of, and whether these services are a threat to the traditional fiat currency based payment systems.

KEY TAKEAWAYS
Touted as "the secure money of the Internet," bitcoin is starting to become accepted as a form of payment, similar to credit cards, at many businesses.
Bitcoin payment services act as an intermediary layer between the payer and receiver for processing of the bitcoin payments; multiple platforms including Shopify and Magento offer support for receiving bitcoin payments.
The bitcoin payment service instantly converts the received bitcoins into the currency of your choice, eliminating the volatility risk.
Compared to a standard credit card payment, bitcoin payments purport to be relatively cheaper due to lower transaction costs.
What is a Bitcoin Payment Service?
In a nutshell, bitcoin payment services, or bitcoin merchant services, enable merchants and businesses to receive payments in bitcoins from individuals for the goods and services being sold or delivered.

It works similarly to the processing of a standard credit or debit card payment service, with some specifics to bitcoins.

For example, you visit a Walmart store to make a purchase, swipe your Amex or Visa credit card at the counter, and punch in the PIN number to make the necessary payment. Similarly, you can make an online purchase at the Walmart website, and make the payment using the same credit card by entering the details on the payment page of the website.

In both cases (the in-store swipe machine or the online web portal), a payment service system works behind the scenes and enables authentication and processing of your credit card for making the payment. The payment service takes care of securely recording and transmitting necessary details of the payment, authenticating the credentials, enabling the transfer of money from your account to Walmart’s, and issuing a confirmation to all the involved stakeholders.


Bitcoin payment services work in a similar fashion. They act as an intermediary layer between the payer and receiver for processing of the bitcoin payments, which also involves recording the transaction on the blockchain public ledger.

They allow merchants to accept payments in bitcoins both online and at physical locations without the buyer or the seller worrying about the complex background process of bitcoin payments that gets executed in the background.

How Does Bitcoin Payment Service Work?
All popular bitcoin payment services offer multiple mediums for merchants to accept bitcoin payments. They include solutions for various platforms, like integration with e-commerce platforms like Shopify, PrestaShop, and Magento; for payment through in-store point-of-sale (POS) systems, like Soft Touch and DC POS; and for direct payments from within the popular billing and accounting solutions, like Host Bill and Invoice Ninja.

One can also find solutions for accepting donations in bitcoins through such services, which include integration with donor services like NationBuilder and Targeted Victory. App developers can find ready-made functions and code libraries in Android SDK and iOS SDK, and in programming languages like Java, Perl, and PHP, which enable them to accept bitcoin payments through their apps and portals.

Essentially, anyone who signs up for bitcoin merchant services can start receiving bitcoin payments from the customers via any and all kinds of transaction mediums from across the globe. A bright kid in Ethiopia can develop a great Android app and receive bitcoin payments from global users using the bitcoin payment integrated with the Android software development kit; or a prominent restaurant in Venice, Italy can use the bitcoin payment-enabled Soft Touch POS to receive bitcoin payments from its patrons.