Recurrent billing for just about any service has become part of our ‘new normal’. Yet, in crypto payments it’s still a novelty. In this article, we’ll look at the difficulties of implementing crypto subscriptions and 3 successful solutions, including one designed specifically for the iGaming industry.
According to the analytical company Zuora, the global subscription economy has grown by 350% in just 7 years, with the revenues of subscription-based platforms rising 5 times faster than those of retail and S&P 500 companies. From Netflix to Zoom, Amazon Prime and Spotify – more and more of the services we use are paid automatically with a single initial pre-authorization.
Why everyone loves recurring billing
Recurring payments are godsend for both merchants and consumers – for several reasons.
- Guaranteed (or at least predictable) revenue;
- Less money spent on collecting late payments;
- Increased customer loyalty.
- Peace of mind: no need to think of when the next payment is due;
- Time saved: up to a few hours every month, compared to having to make each payment individually;
- Security: the fewer times the client’s financial data is collected, the lower the risks;
Recurring billing (also known as auto-pay) is already available on Stripe, PayPal and Braintree, as well as on e-commerce platforms like WooCommerce and through specialized apps like Recurly. One can automatically charge cards, bank accounts and digital wallets like Revolut.
In short, auto payments are more efficient than regular invoicing. Therefore, it’s no surprise that merchants that accept crypto would like to be able to charge their customers on a recurrent basis in Bitcoins and other crypto. However, what is a breeze with fiat money becomes a real headache with crypto.
The problem with auto payments in crypto
By default, a crypto transaction can only be initiated by the sender. The recipient can send a request for funds, but there’s no way for a merchant to charge a customer’s crypto wallet. This is why cryptocurrency is often called a ‘push’ technology. There needs to be a way for the customer to automatically initiate the payment every time.
Another issue is dealing with crypto volatility. Considering that the value of Bitcoin or ETH can drop or rise 20% and more in a day, a merchant cannot possibly set the price of a subscription in crypto. There has to be a system that either converts a fiat price into a crypto equivalent, or the payment should be made in stablecoins pegged to the USD or another fiat currency.
Finally, there’s the issue of changes in the price of subscription. If the service becomes more expensive, the merchant cannot adjust it automatically.
The 3 top solutions
There have been quite a few attempts to implement automatic payments in cryptocurrency. Here we’ll take a look at three successful products that use different principles and technology to achieve the same goal.
Cryptoprocessing.com is the largest crypto payment provider in the iGaming industry, and its recurring payment solution is aimed mostly at iGaming websites, such as online casinos and betting sites. The product is called ‘Plug and Pay’, meaning that players won’t need to waste time on topping up their account when they’d rather be playing and winning.
Gambling is uniquely well adapted to automated payments, because there is no subscription per se: users simply have to fund their account so that they always have money to make bets. Plus, crypto is already the preferred payment method for many iGamers due to its cross-border nature and privacy. Introducing recurring crypto top-ups is a logical next step.
With Plug and Pay, users can link their crypto wallets to their favorite iGaming site and set up automatic deposits. Instead of sending money on a specified date, the user can choose to top up their account once its balance falls below a certain threshold. For example, one can set for $50 to be deposited whenever the balance falls below $10. The user can further decide for how long automatic top-ups will remain active: for example, one month or one year.
Cryptoprocessing.com is now rolling out the Plug and Pay feature for 80 of its integrated merchants. Very importantly, recurring deposits work for all the 30+ cryptocurrencies supported by the payment provider, and merchants can request settlements in 6 different fiat currencies.
This protocol allows only for recurrent transfers of Ethereum assets, including ERC20 tokens and stablecoins. The team of Groundhog even co-wrote EIP-1337 – an Ethereum improvement proposal for subscription payments. The solution relies on multisignature wallets, smart contracts used to pull payments for merchants, and its own network of node operators. Most of the payments are made in stablecoins like Synthetix and DAI. Groundhog is non-custodial: customers always retain control of their private keys.
The downside is that Groundhog works only with the Ethereum blockchain. There’s no way to use it to charge customers in BTC, BCH, LTC etc.
Monarch designed a permission-based smart contract that allows the user to send a specified amount of crypto to the same address every day, week, month, or year. Merchants can also set up custom plans for 3, 6, 9 etc. months – a handy feature for customers who pay for expensive items in instalments. Just like GroundHog, Monarch only supports Ethereum-based assets. To use the recurrent payment feature, the user needs a Monarch wallet, which can be funded from MetaMask. Even though the solution itself is decentralized and uses a smart contract, there is a fiat-off ramp: merchants can request settlements in USD.
Cryptocurrencies are designed to put users in full control of their money and make them independent from banks. Ironically, it’s this privacy and independence that makes it difficult to build a subscription-based cryptocurrency payment system.
However, as the demand from merchants mounts, crypto startups are beginning to produce fully functional solutions. Integration into the subscription economy is a key step on the way to mass adoption of crypto – and 2020 can be the crucial year for recurring crypto billing.