GH Capital is utilizing blockchain to fuel
cross-border adoption of its payment gateway ClickDirectPay. Thanks to blockchain technology, low fees and
cryptocurrency integration will attract high risk merchants globally. ClickDirectPay is eyeing to make
crypto-payments a user friendly experience, which can bolster adoption of cryptocurrency
payments.
ClickDirectPay (CDP), an online payment subsidiary of GH Capital Inc (GHHC), is planning to utilize blockchain technology
for online payments. The company is looking to enable seamless cryptocurrency
payments for shoppers. CDP will collaborate with merchants around the globe in
order to integrate major cryptocurrencies including Bitcoin in the online
shopping experience. “ClickDirectPay shall
become a one-stop shop solution for online merchants worldwide to accept
primary cryptocurrencies in real time, hassle free,”
says Wolfgang Ruecker, CEO of GH Capital Inc. The CEO
of the company didn’t go into much details of how exactly GH Capital is
utilizing the blockchain to enable crypto-payments.
This can prove beneficial for ClickDirectPay as cryptocurrencies reduce
cross-border payment limitations, allowing the company to capitalize on a
global user base. Moreover, the company will benefit from high-risk merchant
markets as blockchain technology and associated cryptocurrencies reduce
chargeback risk resulting in low-cost processing for high risk merchants.
ClickDirectPay – low-cost, niche market strategy of GH
Capital
Operations of ClickDirectPay were limited to Europe before. The
company provided online banking electronic payments infrastructure for
merchants; online banking payments are considerably famous across Europe. Sofort
GmbH and iDeal are among the leading online banking payment processors in
Europe. CDP competed against these big
players through attractive pricing including low-cost fixed fee options for
merchants. The company also steered away from competitors as it created a niche
for low volume, high value businesses amid fees that were charged on
per-transaction rather than on transaction-value basis. You can see detailed
report on CDP’s pricing advantage here.
CDP’s success in Europe was partially driven by inclination of banks
towards online payments. Banking sector has to stay relevant in the online
payment arena, and online banking electronic payments is a way to go. Companies
like CDP and Sofort act as a gateway, which increases the user friendliness for
the customers.
Despite the cost advantage, gaining ground on already established
players isn’t very easy. Adoption was one of the challenges for CDP in the
recent past. Now, with cryptocurrency ambitions, the company is steering away
from competition like Sofort and iDeal.
Cryptocurrency integration bodes well for GH Capital
Support for cryptocurrencies like Bitcoin will create numerous
opportunities for CDP including exposure to global market alongside high risk
merchant markets. Most of the key cryptocurrenies have the properties like
no-geographic restriction and irreversible payment structure. The absence of geographic bounds enables
global reach while irreversible structure of payment structure creates
opportunities in the high-risk merchant markets.
Merchants operating in high risk markets have a problem of finding a
decent payment gateway as large providers screen out high risk merchants. This
creates an opportunity for small gateway players like CDP to tap in to the
market. However, up until now, as high
risk merchants’ account entailed high charge back, it was difficult for payment
processors to offer attractive rates.
CDP is enabling lower processing costs through blockchain
Blockchain based payments can reduce the charge back risk, which can
translate into lower processing costs. CDP is bringing the costs down to 2% of
the processing volume for cryptocurrency transactions. Usually, high-risk
merchants pay fees that exceed 5%. High-risk
processors charge as much as 7%-10%, according Marshall Hayner, CEO of
MetalPay. CDP can benefit from offering a blockchain based cryptocurrencies
payment aggregator, which will attract high-risk merchants around the globe
amid low-cost processing enabled by blockchain technology.
Aren’t payment gateways like CDP the opposite of
decentralization?
Some might argue that using a centralized gateway like CDP kills the
purpose of using blockchain, or cryptocurrency for that matter. Well, not for
everyone.
High risk merchants and un-banked entities don’t prioritize
decentralization. Blockchain and cryptocurrencies like Bitcoin serve the
purpose of enabling low-cost transactions and reducing charge back risk, which
benefits high risk merchants.
Moreover, not everyone is tech-savvy to use cryptocurrency wallets.
Gateway solutions like ClickDirectPay can bring the cost benefits of blockchain
while maintaining the user friendliness of payment processing for consumers.
The point is that blockchain will help CDP offer user friendly cryptocurrency
payment solutions, which can actually accelerate the adoption of
cryptocurrencies as alternative payments.
Further, as cryptocurrencies are in their infancy, high volatility
makes it difficult for merchants to use wallets directly. Merchants need
gateways that have the ability to transform cryptocurrencies into Fiat
currencies in real time. That’s another
reason payment service providers like CDP are essential for merchants to avoid
volatility risk.
Overall, users and merchants will benefit from decentralization
through low cost transactions enabled by blockchain.
Cryptocurrency integration – Some Challenges
Most of the merchants are reluctant to integrate
currencies like Bitcoin due to volatility of price and lack of visibility
around future regulation. Problem of volatility can be solved by using gateways
like CDP, but risk of regulatory setback remains.
Another challenge relates to the consumer side.
Consumer generally won’t see value in using bitcoin for payments if they have
to buy cryptocurrency first, and then transact. This can be addressed by using
bitcoin wallets, but that reduces the user friendliness of payment platforms.
Nonetheless, for the high risk consumer markets,
anonymity of using cryptocurrencies like Bitcoin makes it an attractive
solution. In other words, consumers of high risk industries see value in
transacting using Bitcoin.
Bottom line
GH Capital’s plan to use blockchain and cryptocurrencies can benefit
the company in several ways. First, the company can steer away from competition
in the European market. Second, it can address a global user base amid global
nature of cryptocurrencies. More importantly, the company can emerge as a key
payment processing provider for the high-risk merchant market as chargeback
risk and, consequently, transaction costs go down for high-risk merchants.
Disclosure: This publication is for
informational purpose only and reflects the opinion of Focus Equity’s analysts.
This opinion doesn’t constitute a professional investment advice. We have no
positions in any stocks mentioned, and no plans to initiate any positions within
the next 72 hours. Our technology analyst compiled this research piece. Focus
Equity is a team of analysts that strives to provide investment ideas to the
U.S. equity investors. This research piece is sponsored by a third party.