4 Surprising Billing Challenges Web3 Merchants are Facing

1. Exposed Financial Activity

For merchants accepting crypto, whether for a one-time invoice or a recurring subscription, chances are the merchant is using the same wallet address across several customers to accept payments.

Doing so is convenient because it enables a merchant to centralise their incoming payment activity, but however, results in the downside that most web3 merchants are poorly equipped to deal with today. By reusing a wallet address, customers are able to utilise publicly available block explorers to view the transactions flowing in and out of a merchant’s wallet. This lack of privacy can be uncomfortable for merchants because it puts their financial activity into full view.

In response, Super has seen most merchants attempt to navigate this challenge by manually creating wallet addresses when accepting a new payment, however, in the long-term such a solution is impractical.

This problem regarding the exposure of a merchant’s financial activity is entirely idiosyncratic to web3 merchants, and one that their web2 counterpart do not experience. Commerce in this instance are intrinsically private, making web3-specific billing platforms necessary such that web3 merchants are able to enjoy the same benefits.

2. Invoice & Crypto Payment Reconciliation

Blockchains are an innovation on payments because they provide a permissionless rail by which value may be moved between two transacting parties, and serve as a viable alternative to centralised payment rails, such as VISA & Mastercard. However, as a result of this innovation, web3 merchants utilising this rail inherent an entirely unique challenge: reconciling invoices with on-chain payments.

Despite being at the cutting edge, the payment operations of most web3 merchants are very similar to their web2 counterpart when accepting payments, that is, invoices are still issued as part of the billing process.

Invoices serve as an accounting and legal record of the services rendered by a merchant, and quantifies the financial obligation of doing so. As a result, regardless of if it is a web3 merchant accepting a payment in crypto, or a web2 merchant accepting a payment via wire transfer, an invoice is required.

This creates a disconnect between the invoice that the merchant sends to a customer, say via email, and the transaction the customer initiates on-chain to pay the merchant. Creating the following reconciliation challenge: how is the on-chain payment linked to the sent invoice?

Web3 merchants need to be able to successfully reconcile their issued invoices and on-chain payments, so they have an accurate understanding of which ones are paid, and which ones are outstanding.

This a problem that web2 merchants will be more familiar with given the challenge of reconciling incoming payments with bank statements. However, given that a web3 merchant will accept both fiat and crypto payments, the challenges of reconciliation is doubled.

3. Inflexible Crypto Billing Models

A billing model is simply the manner in which a business chooses to charge for its goods and services. Particularly as it relates to software businesses, common billing models include: flat-based recurring, where a merchant charges the same price every month; or usage-based, where a merchant charges based on a customer’s consumption, typically measured on a per unit basis.

Simple billing models where a merchant charges the same price every month, is a paradigm most merchants are comfortable with. However, the challenge comes in when the model becomes more complex, such as a pear-seat billing model, wherein the merchant charges based on the number of users on a particular account.

This is because of the on-going computation required to keep track of the changes in a customer’s subscription over the course of a billing cycle. Platforms that are able to perform these computations are typically referred to as billing engines.

Web2 merchants rely on platforms such as Stripe Billing or Chargebee, which have robust engines that are able to compute varying changes over a billing cycle and issue a fiat invoice at the end. However, no such equivalent exists for one-time or recurring subscriptions, where the resultant invoice is payable in crypto only.

Because web2 billing engines do not integrate with crypto payment methods, web3 merchants are required to perform these computations manually themselves. A process which becomes unfeasible as the merchants processes a greater number of payments, or the billing logic involved becomes more complex.

Navigating the challenges of inflexible billing models is one that web2 merchants have largely been able to solve with the advent of modern billing platforms. However, in the case of web3 merchants it presents a fresh challenge where no tools, prior to Super, existed.

4. Fragmented Billing Data

Fiat currency represents a payment type that is the most commonly used medium of exchange when transacting - typically through USD, GBP and more. It straddles across both domestic and international payment rails, and has become the default unit of account in commerce.

However, cryptocurrencies, are a fundamentally new payment type that offer an alternative unit of account for commerce. BTC instead of USD, and ETH instead of GBP, means that the very manner in how we track and account for payments must be adjusted to accommodate for this new way in moving money.

Given that web2 payment platforms are built from the ground up to only account for commerce in fiat currencies, this makes them in their current form, technologically incapable of accounting for cryptocurrency transactions.

For example, billing platforms such as Stripe and Chargebee are not built to process and represent cryptocurrency payments in its user interface, making it a poor option for web3 merchants.

This issue of interpretability is further exacerbated when the merchant actually offers both cryptocurrency and fiat as a method of payment for their goods & services. Forcing merchants to rely on manual workarounds, such as spreedsheets, as a means of unifying their fiat & crypto billing data.

This inability for fiat & crypto payment data to flow easily is the root of the fragmentation that many merchants in web3 are dealing with today. Given web2 merchants deal with a single payment type, fiat, the problem of fragmentation is nonexistent and is solely experienced by web3 merchants.

Conclusion

Web3 merchants face a plethora of billing challenges that their web2 counterpart do not even have to think about. These challenges are surprising and if not dealt with, result in compounding operational inefficiencies that make it challenging for them to run their business.

This article serves to document 4 surprising problems web3 merchants face, which consequently cannot be solved by web2 platforms. As a result, web3-native platforms such as Super are necessary in helping to navigate this billing complexity.

If you’re interested in learning more about Super, and how it can supercharge your billing as a web3 merchant, schedule a demo today.