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What PayPal’s Bitcoin Integration Means for Online Merchants

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There’s quite a lot happening on the PayPal front at the moment (check out our recently updated PayPal review here) — not only is it preparing to spin off from its longtime parent company, eBay, but PayPal now allows its merchants to accept Bitcoin payments.

For those who don’t know about Bitcoin, it’s a virtual currency, sometimes also called a cryptocurrency. Bitcoins aren’t printed or minted. In fact, they only ever exist as records of transactions, collected in a virtual wallet. They are processed over a network, and the entire platform is open-source, meaning it’s easy for anyone to get involved in the process and start earning Bitcoins. Check out our guide to accepting Bitcoin for more information.

PayPal originally announced support for Bitcoin back in September of 2014 via a partnership with Braintree, confirmed in the SEC filing from April 2015. (Also worth mentioning: eBay originally purchased Braintree in 2013. With the upcoming split, Braintree (see our review) will fall under a new entity called PayPal Holdings, which will oversee eBay’s payments segment of the business.) Additionally, PayPal has partnered with three major Bitcoin processors: Coinbase, BitPay and GoCoin.

What Bitcoin Acceptance Means for Merchants

The takeaway is that PayPal, obviously one of the biggest names in online payments, clearly thinks that Bitcoin is the wave of the future. Let’s take a closer look at what it means for merchants, whether you have an online store, a brick-and-mortar location, or both.

Who Controls Bitcoins

Banks don’t control Bitcoins like they do other currency. In fact, Bitcoins are unregulated, which is an advantage: No single institution controls the platform, and so unlike national currencies, a bank simply can’t print more (leading to devaluation and possibly inflation).

Bitcoin is also semi-anonymous. Every transaction is sent to a Bitcoin address and added to a public register (called the blockchain), but who owns that address is not known. You can set up multiple Bitcoin addresses, further obscuring your information. This is the Internet we’re dealing with, so you should absolutely learn about how to securely handle Bitcoin payments and protect yourself.

On the other hand, though, it also means there’s no means of recovering Bitcoins in fraudulent transactions. It’s like cash in this respect (except, of course, that Bitcoins don’t actually have a physical form). And Bitcoins aren’t immune to price fluctuations, either. As of writing this, a single Bitcoin is equal to $236.61 U.S. dollars, but prices spiked higher than $600 in the summer of 2014, have reached $1,100 previously.

Payment Fees

One of the key advantages to Bitcoin is the fact that the payment processing fees are much, much lower than those assessed by banks and other institutions. In some cases, there are no transaction fees at all.

However, that’s what you see when you use the Bitcoin network, not an intermediary like PayPal or Braintree. Back in September, Coinbase announced on its blog that merchants using Coinbase via Braintree to accept Bitcoins would pay a flat 1% fee — which is still quite a bit less than the 2.9% + $0.30 normally assessed by PayPal and Braintree.

Whether the transaction fees are going to stay low (or nonexistent) as Bitcoin becomes more popular remains to be seen, but if you have experience with Bitcoin and transaction fees, we’d love to hear about it! Drop us a line in the comments.

Time to Process Transactions

Because Bitcoins aren’t regulated like other currency, the time to process transactions is shorter — nearly instantaneous in some cases. You can send money from one continent to another within 10 minutes, for a lot less than a wire service and no worries about frozen funds. PayPal works nearly instantaneously as well, making this a very good fit for merchants who want their money right away.

Mobile Payments and Bitcoin

One of the advantages of Bitcoin being digital is that it’s perfectly suited to mobile applications. If you have a Bitcoin wallet app installed, you can send money or make payments using a QR code or NFC. That means merchants whose systems are set up to handle both Bitcoin and mobile payments can readily accept payments at brick-and-mortar locations as well as in online shops.

The Future of Bitcoin

In the world of retail, PayPal’s Bitcoin integration means merchants have more payment options with hardly any work to do on their part. However, PayPal (and by extension, its subsidiary Braintree) is far from the only way to accept Bitcoin. In fact, Stripe, Shopify and Square all offer Bitcoin integration. Menufy, an online ordering system for restaurants, also allows restaurants to accept Bitcoin.

Like many other technologies, like mobile wallets, NFC, and beacons, Bitcoin has been hovering around at the edge of the digital scene for several years. There are plenty of proponents who like what Bitcoin stands for — namely freedom in the form of a truly digital, mobile currently. It certainly has the power to change how we think about spending money online and e-commerce in general. But right now, it’s not widespread.

That certainly looks about to change. Just like Apple finally backing NFC payments with Apple Pay has lead to an uptick in mobile payments, PayPal offering Bitcoin integration could be the catalyst that pushes Bitcoin front and center on the Internet stage.

Melissa Johnson

Melissa Johnson

Melissa Johnson has been writing about payment processing and mobile payments since 2014, and has been quoted in articles for Credit Karma and The Next Web, among others. She graduated from The University of Kansas in 2010 with bachelor's degrees in English and journalism.
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1 Comment

Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Stephanie

    I am with you all the way here 100%! I believe that this is the only thing that has kept bitcoin from its ultimate burst into society today. As a merchant I have found it easier to accept bitcoin payment rather than deal with finding a way to safely process my cash payments. So if the two were to integrate it would be the publicity and reinforcement needed to make bitcoin more accessible and convenient for the rest of economy to learn its benefits. I was upset to learn that the original PayPal commercial for the Super Bowl was originally them announcing their merger with bitcoin and they opted out worried of consumer confusion.
    When it come to the card payments I first have to worry about fraud detection and a lot of it if you don’t want to have to deal with disputed payments/charge backs. Then there is finding a safe way to process my payments without worrying about them shutting the account off and holding my funds for xxx amount of days, weeks, or I have even seen in some case months. (As I just went thru this process with Square) I had taken all measures to be a great merchant and had 0 disputed payments yet got an email informing my account now closed with no warning or notice. I actually loved squares services and conveniences but but once there is a problem you are left hanging with no answers from support. I have a PayPal business account that I could use with PayPalHere but have been hesitant to actually use it as my primary way to process my payments. Though if they were to integrate with bitcoin I believe it would be the deciding factor of me choosing them as my primary processing center. Where as with bitcoin it is as simple as the click of a button for my customer to send payment directly to my wallet.
    I first heard of bitcoin a few years ago but it was only around July of last year that I chose to educate myself a little on cryptocurrencies. My main objective being to find out what a bitcoin was, how it was measured, what it was worth, and how to safely obtain, keep, and transfer them. I was amazed, I can still spend hours reading about the technology behind it all. I know there are risks with it but there are just as many with cash payments. At least with bitcoin there are several layers of security and I can choose what security measures I need to take for my wallet anywhere from applying 2-Factor Authentication (2-FA) to having a cold storage (Offline) wallet.
    A transfer is almost always instant to 5 mins depending on the fee you send with it and the blockchain. And the fees are next to nothing compared to processing a card at 3.9% +30 per transaction. You can send instantly let it sent a minimal fee for you or you can customize your fee and guarantee an instant send. For most small transactions the minimum fee it sends $.02, but I like to send $.02 for every 1000bytes sent. I have seen people send without a fee at all but that is a chance to take because with no fee it will be lowest priority for blockchain. And that is if you are sending from one wallet to another but sending to and from a site may have fees applied by that site which I have observed are usually no more than 1%. I also love that from the moment you send you can track your bitcoin on the blockchain until it confirms at destination wallet. And last but not least bitcoin is 100% irreversible (no chargebacks), you have to send them for them to leave your wallet. Only thing there is always be careful and double check all your info before sending because once you do it is sent and there is no getting it back unless it is sent back by the owner of that wallet.
    I only began this comment to respond to you about the bitcoin fees originally but thought that I would go ahead and contribute my opinion on the subject at hand as well. I only hope some of my experience may help you as your reviews help me. Thank you for the time you put into informing others and helping to gather so much info into one place.

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