GH Capital Uses Blockchain to Reduce Payment Costs for Merchants

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.