Blockchain payment processing is important to modern crypto accounting software, as it allows businesses to easily manage their crypto transactions. In this blog, we’ll walk you through a complete guide on blockchain payment processing.

Looking to pay invoices through crypto without any issues? Use our crypto accounting software.

Table of Contents

• What Is A Blockchain Payment Processing System?

• How Can Blockchain Be Used In Payments?

• 3 Benefits Of Blockchain Payment Processing

• 6 Payment Applications Where Blockchain Becomes Helpful

• How Does Cross-Border Blockchain Payment Work

• Regulatory Landscape Of Blockchain Payments Processing

• Major Blockchain Payment Platforms

• 4 Main Challenges Of Blockchain Payment Options

• Pay Your Bills In Crypto With Our Crypto Accounting Software Today － Book A Demo To Learn More

What Is A Blockchain Payment Processing System?

Blockchain payment systems are a decentralized digital infrastructure that leverages blockchain technology to facilitate secure and direct transactions without an agent or broker. These systems use cryptographic techniques to ensure the integrity, confidentiality, and authenticity of transactions, providing security and transparency compared to traditional payment methods.

Market Size of Blockchain Payments

The global blockchain market was estimated at $11.14 billion in 2022. It is projected to grow to $17.57 billion in 2023 and reach an impressive $469.49 billion by 2030 at a CAGR of 59.9%. The largest blockchain use case segment is cross-border payments and settlements, accounting for 15.9% of the total market 2021. 

By 2024, the total value of B2B cross-border payments stored on the blockchain is estimated to exceed $4.4 trillion, representing 11% of total B2B cross-border payments.

How Can Blockchain Be Used In Payments?

• Blockchain payment transactions are initiated by network participants or automatically enforced by smart contracts upon pre-defined events. 

• The requested transaction is broadcast to the peer-to-peer (P2P) network of nodes, which validate it based on the pre-defined consensus protocol. 

• Once validated and encrypted with a hash function, blockchain data is stored in timestamped blocks linked in chronological order. 

• The blocks form a distributed ledger that serves as a single source of truth to trace payments-related activities and prove the identity of blockchain users. 

• All network members maintain copies of the shared ledger that get auto-updated as new data appears.

Expanding Use Cases Beyond Payments

Users interact with a blockchain to send, receive, and trace payments using role-specific web and/or mobile applications (e.g., for individuals, businesses, and financial services providers). The blockchain solution can be integrated with:

• Crypto wallet

• Accounting software

• Financial data marketplaces

• Ecommerce platforms 

• Supply chain management software

For startups, accepting digital assets as payment can attract a broader customer base and facilitate international transactions without the complexities of traditional systems. On the other hand, enterprises can explore tokenization — representing assets or currencies on the blockchain — to optimize their payment processes further.

Both startups and enterprises can benefit from the decentralization of blockchain, which reduces reliance on a central authority and minimizes the risk of a single point of failure. This distributed nature enhances resilience and ensures continuous operation even in the face of disruptions.

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3 Benefits Of Blockchain Payment Processing

1. Lower Trade Costs

Blockchain payment gateways offer companies involved in global trading the opportunity to save money through lower transaction fees. This is possible because these gateways eliminate the need for currency exchanges and intermediaries like banks and insurance services, ensuring secure transactions. As a result, businesses have more control over their funds and can handle international transactions more efficiently. 

2. Faster Processing Speed

The absence of centralized banks in blockchain gateways makes them more efficient than traditional payment methods. Unlike systems that have to follow working hours and days, crypto payments are settled within minutes. This quick processing speed guarantees that businesses can conduct transactions and receive payments at any time, irrespective of day or time. This flexibility enables businesses to manage their cash flow effectively. 

3. Automated Settlements

Unlike traditional credit card payments that follow a standard set of regulations, blockchain payment gateways allow for high customization. This customization allows businesses to:

• Configure fees

• Support multiple currencies

• Select preferred payment service providers

Companies can decide whether to convert crypto payments to traditional currency or retain them in stablecoins. This level of control further highlights the benefits of blockchain payment solutions for businesses in various industries.

Traditional Payments vs Blockchain Payments

Authority

In traditional payment systems, transactions rely on central authorities like banks and financial institutions for validation. With blockchain payments, decentralized networks of nodes verify transactions without the need for a middleman. This decentralization enhances security and reduces the risk of fraud, as transactions are authenticated by multiple nodes across the network.

Privacy

While traditional systems prioritize user privacy, they require disclosing personal information to multiple third parties. Blockchain transactions, on the other hand, provide a degree of privacy while maintaining transparency for all participants. This balance between privacy and transparency is a key feature of blockchain technology.

Speed

Traditional payments can vary in settlement times, from instant to lengthy, especially for international transactions. In contrast, blockchain payments provide real-time or near-instant settlement, especially those using stablecoins. This fast transaction processing is a significant advantage of blockchain payments, particularly for cross-border transactions.

Transactions

Traditional transactions often involve multiple intermediaries, adding processing time and fees. In contrast, blockchain transactions enable direct interactions between participants without a third party. This process reduces costs and enhances efficiency for businesses and consumers, enabling greater financial inclusivity.

Reversibility

Traditional transactions are reversible, allowing for chargebacks and refunds. In contrast, blockchain transactions are irreversible once added to the chain, requiring legal action to contest them. While irreversible transactions may scare you, they add more trust and security to blockchain payments.

Blockchain Payments: Transforming the Future of Finance

Blockchain payments offer a secure, efficient, and transparent alternative to traditional payment systems. By leveraging decentralized networks and cryptographic protocols, blockchain payments provide unparalleled privacy, speed, efficiency, and security. As more businesses and consumers move to blockchain payments, the finance industry is poised for a significant transformation.

6 Payment Applications Where Blockchain Becomes Helpful

1. Charitable Donations

Blockchain technology enhances transparency and traceability in charitable donations. Donors can track how their contributions are utilized, exercising accountability and reducing the risk of fraud. A notable example is the World Food Program (WFP), which leverages blockchain technology to improve the efficiency and transparency of cash transfers for humanitarian assistance. Currently, the initiative empowers over 4 million people monthly.

2. Supply Chain Payments

In supply chain management, blockchain automation offers transparency and precise payment settlement as goods move through the chain. For example, Walmart, after successfully experimenting with tracking pork products in China, mandates all its spinach and lettuce suppliers to use the technology.

3. Micropayments

Blockchain facilitates micropayments involving minimal sums of money. This capability aids business models that are dependent on small but consistent contributions from consumers. Content creators, for instance, benefit as consumers make small payments for access to digital content, articles, and various online services.

4. Remittances and P2P Blockchain Payments

Blockchain streamlines the process of remittances by providing a direct and cost-effective way to transfer funds internationally. Users can send and receive remittances without relying on traditional money transfer services that often charge a premium for currency conversion and international transfers.

5. Decentralized Finance (DeFi)

DeFi platforms exploit blockchain to offer decentralized financial services, including:

• Lending

• Borrowing

• Trading

This model enables users to participate in financial activities without depending on traditional banks. Unlike legacy institutions, DeFi entities accept crypto security on the platform, simplifying establishing creditworthiness.

6. Peer-To-Peer (P2P) Transfers

Peer-to-peer transfers allow users to transfer funds directly from their accounts to another person. Blockchain technology integrates these transactions, offering a more secure and efficient means of transferring funds among individuals.

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How Does Cross-Border Blockchain Payment Work

With the introduction of blockchain technology, cross-border transactions have never been simpler. Blockchain technology eliminates intermediaries and enables direct peer-to-peer transactions. But how does blockchain technology make cross-border payments faster, cheaper, and more secure?

Currency Agnosticism

Currency agnosticism is popular. This essentially means that blockchain technology can effortlessly facilitate transactions in various currencies. Entrepreneurs can transact directly through digital assets or use blockchain platforms that support multiple fiat currencies.

Payment Platforms and Services

Several blockchain payment platforms and services cater to cross-border transactions. Entrepreneurs should research and select platforms that meet their business needs while remaining user-friendly, scalable, and secure.

Volatility Management

Stablecoins are popular for their price volatility, which can concern businesses. Strategies to manage this volatility, such as using stablecoins linked to fiat currencies, can be employed to mitigate risks associated with currency fluctuations.

Integration with Existing Systems

One primary concern for businesses when adopting new technology is whether it can integrate smoothly with existing systems. Blockchain payments can integrate with most legacy financial and accounting systems.

Network Scalability

Network scalability becomes a significant consideration as businesses grow and transaction volumes increase. Entrepreneurs must ensure their chosen blockchain network can handle the increasing transaction volumes and growing business needs.

Risk Management

Blockchain technology offers enhanced security, but a thorough risk assessment should be conducted before implementing a payment solution. Factors like regulatory changes, market volatility, and technological risks must be carefully considered to ensure a reliable payment system.

Regulatory Compliance

Understanding regulatory considerations in different areas is vital for a smooth cross-border payment experience. Different regions have specific regulations governing crypto and blockchain transactions, and compliance with these regulations is important for successful cross-border payments.

Regulatory Landscape Of Blockchain Payments Processing

Governments worldwide are concerned with how to regulate digital assets effectively. Some countries have embraced and regulated digital assets, providing legal frameworks for their use, while others have imposed restrictions or outright bans. 

Regulation and Compliance

One area of concern for governments is the potential misuse of decentralized payment systems for illegal activities, such as money laundering and terrorist financing. To address these concerns, countries have implemented regulations such as:

• The Fifth and Sixth Money Laundering Directives in Europe

• FinCEN’s Final Rule in the USA

These regulations clarify that virtual currencies and their trade exchanges are subject to anti-money laundering legislation (AML). As such, regulations often include AML and KYC requirements for crypto exchanges and businesses involved in decentralized payments. 

A Global Challenge

The regulatory treatment of blockchain payments varies globally due to perspectives on the risks and benefits associated with digital assets. The decentralized nature of digital assets poses a challenge for regulators, as traditional methods of enforcement and oversight may not be as effective. 

Regulatory approaches range from outright bans in some countries to more permissive regulatory frameworks in others. As a result, navigating the regulatory landscape of blockchain payments can be complex and requires a nuanced understanding of the legal and compliance issues at play. 

Major Blockchain Payment Platforms

1. Acctual

Acctual is crypto accounting software for businesses and freelancers transacting in digital assets. It simplifies accounts payable and receivable, making it easy to pay bills and send invoices in crypto. Our flexible options let you pay in crypto while vendors receive fiat, receive crypto while clients pay in fiat, or receive fiat while clients pay in crypto. We also integrate with your accounting system, saving you time on month-end reconciliation.

Key features:

• Multi-level approvals for bills

• Fiat-to-crypto and crypto-to-fiat payments

• Built-in AML screening

• Crypto invoice links

• Automatic payment notifications

• With our smooth AP/AR process, automated bookkeeping, built-in internal controls, with flexible payment options, you can simplify your financial operations with us.

Book a call with our team to learn about how you can pay bills and send invoices in crypto with our crypto accounting software today!

JPMorgan Chase

JPMorgan Chase's blockchain group Onyx, established in 2020, is dedicated to changing global money movement through distributed ledger technology. Onyx caters to financial institutions and fintech companies, offering blockchain-based solutions for:

• Domestic and international payments

• Secure exchange of payment-related data

• Digital asset tokenization

Coinbase

Coinbase is a widely used blockchain payment platform that allows users to purchase, sell, and store over 150 digital assets, converting earnings into fiat currency. The platform offers various tools for individuals and businesses to expand their crypto presence, including features for:

• Earning rewards and interest on digital assets

• Creating crypto wallets

• Developing and linking NFTs

PayPal

PayPal, a popular online transaction platform, supports the transfer of digital assets such as:

• Bitcoin

• Bitcoin Cash

• Ethereum

• Litecoin

Users in the U.S. can move their crypto between PayPal and external wallets and exchanges and send and receive funds to other users. PayPal also enables fee-free crypto transfers within the platform and allows users to pay for goods and services with crypto at millions of merchant locations.

Circle

Circle currently focuses on digital currency and blockchain-based financial services. Their primary active service is the management and issuance of USDC (USD Coin), a stablecoin pegged to the US dollar. USDC is designed to maintain a stable value of $1 and is backed by short-term U.S. government securities.

Circle no longer offers the Circle Pay app or peer-to-peer payment services, having discontinued these in 2019. Instead, the company now concentrates on providing financial infrastructure for businesses and developers, centered around their USDC stablecoin. USDC is supported on multiple blockchain networks and can be used globally for various financial transactions and applications.

Additionally, Circle offers over-the-counter (OTC) liquidity services to institutions and earns revenue from interest rate spreads on clients' reserve balances. The company also continues to work on blockchain innovation, particularly through its open-source initiatives aimed at advancing payment technology.

4 Main Challenges Of Blockchain Payment Options

1. Legal Requirements

Regulations against digital assets differ between countries, and some locations strictly ban dealing and transacting with Bitcoin or other coins. To overcome this:

• Businesses must conduct thorough due diligence on the legal status of digital assets in their operating jurisdictions.

• Companies can consult legal experts specializing in blockchain technology to ensure compliance with local laws and regulations.

2. Technological Limitations

Countries with limited access to Bitcoin ATMs or highly qualified developer teams can make it challenging for companies to adopt crypto solutions. To address this challenge:

• Companies can explore partnering with established blockchain payment providers with a wide network of access points. 

• Investing in training programs for their IT teams can enhance the technical capabilities required to implement and manage blockchain payment systems effectively.

3. Cybersecurity

Scammers and hackers have always targeted Blockchains and decentralized transactions, raising concerns among businesses and users. Businesses can address this challenge by:

• Implementing tough cybersecurity measures such as encryption, multi-factor authentication, and regular security audits. 

• Educating employees and customers on best practices for securing their crypto wallets is vital in mitigating cybersecurity risks associated with blockchain payments.

4. Governance

The immutability of crypto payments can lead to fund loss or lack of control over blockchain operations, which requires laying clear-cut on transacting with crypto payment methods. To handle this challenge:

• Companies should establish comprehensive governance frameworks for managing blockchain payments.

• Defining clear procedures for handling disputes, tracking transactions, and securing private keys to prevent unauthorized access to crypto wallets.

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Pay Your Bills In Crypto With Our Crypto Accounting Software Today － Book A Demo To Learn More

Acctual is crypto accounting software for businesses and freelancers transacting in digital assets. It simplifies accounts payable and receivable, making it easy to pay bills and send invoices in crypto. Our flexible options let you pay in crypto while vendors receive fiat, receive crypto while clients pay in fiat, or receive fiat while clients pay in crypto. We also integrate with your accounting system, saving you time on month-end reconciliation.

Key features:

• Multi-level approvals for bills

• Fiat-to-crypto and crypto-to-fiat payments

• Built-in AML screening

• Crypto invoice links

• Automatic payment notifications

• With our smooth AP/AR process, automated bookkeeping, built-in internal controls, with flexible payment options, you can simplify your financial operations with us.

Book a call with our team to learn about how you can pay bills and send invoices in crypto with our crypto accounting software today!