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Cryptocurrency for Recurring Payments

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedApr 20222 min read

Many tech companies and subscription services are asking whether they should be accepting cryptocurrency for recurring payments. And, if so, how could this be managed?

In this post, we’ll explain the ins and outs of cryptocurrency and ask whether it could be a viable form of payment for recurring billing.

How does cryptocurrency work?

A cryptocurrency like Bitcoin doesn’t have a physical value. Rather than viewing this type of currency as a ‘coin’ or assessing it’s ‘worth’ in terms of a certain amount in money or gold, cryptocurrency is determined by the parties conducting transactions.

Cryptocurrencies aren’t strings of files, and they can’t be attached to messages or emails. Instead, a cryptocurrency relies on a shared ledger (blockchain) that’s managed by thousands of individuals.

Cryptocurrency works by sending a message to the ledger managers. For example:

User A sends 10 coins to User B

Each time a transaction occurs, the ledger database is updated, so that everyone can see it, and the transaction is completed.

Benefits of cryptocurrency

Cryptocurrency is a highly transparent form of payment, where an account owner has access to the public ledger and can see all transactions, i.e., where their money goes and where it’s been. For this reason, cryptocurrency could be valuable for subscription-based companies, allowing them to quickly track all their transactions. Businesses can also be certain that coins in their account are actually there – and not being invested secretly elsewhere.

Cryptocurrency is also a secure form of payment. Every user has two keys for their account: a public key and a private key. This makes it almost impossible for anyone to fake a transaction in their name.

Cryptocurrency is a ‘push’ technology which gives the spender the power, with the ability to send currency from their account to another. Users cannot ‘charge’ other users’ accounts; they can only make requests and invite buyers to initiate transactions. This means that no one is at risk from having coins taken from them unwillingly.

Challenges for cryptocurrency for recurring payments

Cryptocurrency systems don’t inherently lend themselves to recurring billing, even though many business owners want to offer this as an option for their customers. The fact that cryptocurrency is a ‘push’ system makes it difficult for businesses to manage recurring payments, since it’s up to customers to initiate their recurring payments when they are due.

Wallets could provide a way for merchants to include cryptocurrency as a payment option. Wallet platforms, like Groundhog, allow businesses to create ‘smart contracts’ with their customers with the aim of regulating recurring billing.

There are still many obstacles however, when it comes to offering cryptocurrency as a payment option:

Since cryptocurrency places the ‘power’ in the hands of the subscribers, it could be difficult tokeep track of customers who have cancelled payments. By using a subscription billing platform like GoCardless, on the other hand, service interruptions are automated, alerting companies to cancellations.
Another problem with using cryptocurrency for recurring payments is that SaaS and other subscription-based companies are unable to raise prices without the explicit permission of users. Ideally, a provider would be able to increase prices when necessary and notify customers by automatically charging a credit card with the new price.
Cryptocurrency wallets require companies to set up new ‘smart contracts’ every time the price changes.

Using cryptocurrency for recurring payments involves many challenges, and wallet platforms are working hard to solve them. In the meantime, it may be cheaper and preferable to stay with a safe, reliable payments processing platform to collect subscription-based payments.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.