How Can Traditional Payments Find Their Niche in Crypto?

Traditional payment service providers (PSPs)—banks, card networks, payment processors, and fintech companies—possess decades of experience, vast customer bases, and established trust that can be leveraged in the emerging crypto economy.

Rather than viewing crypto as a threat, forward-thinking payment providers are discovering opportunities to enhance their services, expand their market reach, and remain relevant in a rapidly evolving financial ecosystem.

Understanding the Current Payment Landscape

The Traditional Payment Ecosystem

Traditional payment infrastructure consists of interconnected systems built over decades. At its core are central banks issuing currency, commercial banks providing accounts, and payment networks like Visa and Mastercard facilitating transactions. This ecosystem processes trillions of dollars daily through methods including cards, ACH transfers, wire payments, and newer innovations like real-time payments.

The system’s strengths include extensive merchant acceptance, consumer protections, regulatory compliance, and relative stability. However, it also suffers from limitations: cross-border payments remain slow and expensive, settlement can take days, increased compliance costs, and significant portions of the global population remain unbanked.

The Crypto Payment Revolution

Cryptocurrency emerged as a response to these limitations, offering peer-to-peer transactions without intermediaries, borderless transfers, programmable money, and financial inclusion without traditional banking relationships.

However, crypto payments face their own challenges:

• Price volatility discourages everyday use as currency
• Regulatory uncertainty creates compliance risks
• User experience remains complex for mainstream adoption
• Security concerns and technical barriers persist

These challenges create the perfect opportunity for traditional payment providers to apply their expertise in addressing precisely these issues.

Strategic Entry Points for Traditional Payment Service Providers

Crypto Card

Crypto cards represent an innovative, lower-threshold bridge between traditional payment networks and cryptocurrency holdings, allowing users to spend their digital assets in everyday retail environments.

Transforming volatile digital assets into practical spending tools without requiring merchants to modify their existing payment systems, crypto cards effectively solve the fundamental challenge of cryptocurrency utility. This interoperability can significantly accelerate real-world cryptocurrency adoption by reducing technical barriers for both consumers and businesses.

This solution leverages existing payment infrastructure while enabling crypto adoption through familiar payment experiences, like Crypto.com Card and Binance Card.

Pay In & Pay Out Services

Pay In refers to all processes through which funds enter a payment system, including mechanisms for receiving money from external sources and crediting it to user accounts or platform wallets. These processes typically involve verification, processing, and settlement of incoming transactions to ensure funds securely and reliably enter the system.

Pay Out refers to all processes through which funds exit a payment system, including mechanisms for transferring money from the platform to users’ external accounts or other recipients. This involves verifying the legitimacy of withdrawal requests, processing payouts, and executing transfers.

• On/off ramp services: Allowing consumers to easily purchase crypto with traditional payment methods or convert crypto back to fiat. With established compliance frameworks, banking relationships, and user trust, traditional PSPs can reduce the friction that typically accompanies cryptocurrency purchases and liquidations.
• Merchant settlement solutions: Enabling businesses to accept crypto payments while receiving settlement in their preferred fiat currency. PSPs can provide flexible settlement options that maximize balance sheet efficiency while minimizing currency risk exposure.
• Currency risk management: Providing hedging instruments to protect merchants from crypto price volatility, as few crypto-native companies possess the risk management sophistication of established payment providers.

These services leverage traditional providers’ expertise in currency exchange while addressing a critical need in the crypto economy.

Cross-Border Payment Solutions

International payments represent one of the most compelling use cases for cryptocurrency, addressing the inefficiencies of traditional correspondent banking:

• Stablecoin-powered remittance: Using dollar-pegged cryptocurrencies to enable faster, cheaper international transfers. Stablecoin-based transfers can reduce settlement time from days to minutes while significantly lowering operational costs.
• Corporate treasury solutions: Helping multinational businesses optimize cross-border payments and liquidity management. By integrating with blockchain technology, PSPs can help maintain a 24/7 fund operation with fewer intermediaries.
• Settlement networks: Creating alternative settlement paths for financial institutions that reduce costs and settlement times.

These solutions can dramatically improve upon traditional providers’ existing cross-border offerings while maintaining regulatory compliance and customer trust.

Payment Processing with Crypto Options

Traditional payment processors can expand their offering by integrating crypto payment rails:

• Unified payment terminals: Accepting both card payments and crypto transactions through existing point-of-sale systems.
• Multi-currency digital wallets: Allowing customers to store and spend both fiat and cryptocurrencies from a single interface.
• Payment optionality: Enabling customers to choose their preferred payment method while keeping the merchant experience consistent.

By integrating crypto alongside traditional payment methods, providers can capture incremental transaction volume regardless of which payment method gains dominance.

Leveraging Existing Strengths

Trust and Brand RecognitionTrust and Brand Recognition

Perhaps the most significant advantage traditional payment providers possess is established trust. In a space plagued by scams, hacks, and technical complexity, trusted financial brands can provide:

• Security assurance: Applying decades of experience in fraud prevention and cybersecurity to crypto custody and transactions.

• Dispute resolution: Extending familiar consumer protections to crypto transactions where appropriate.

• Education and guidance: Helping customers understand crypto opportunities and risks through trusted advisory relationships.

  Compliance Infrastructure

  Regulatory compliance remains one of the biggest hurdles for crypto adoption. Traditional payment providers already possess sophisticated compliance capabilities that can be adapted for crypto:

• KYC/AML expertise: Applying battle-tested identity verification and transaction monitoring to crypto transactions.

• Regulatory reporting: Leveraging existing systems to fulfill tax reporting and regulatory requirements.

• Sanctions screening: Ensuring crypto transactions comply with local and international law.

  Customer Base and Distribution Network

  Traditional payment providers start with a critical advantage: millions of existing customers and merchant relationships. This provides:

• Instant scale: The ability to roll out crypto services to massive existing user bases.

• Cross-selling opportunities: Introducing crypto products to customers already using traditional financial services.

• Network effects: Leveraging existing merchant networks to drive crypto acceptance.

Technical Implementation Considerations

Entering the crypto space requires significant technical decisions:

Build vs. Partner Strategy: Most traditional providers will benefit from partnering with crypto-native companies for technical expertise while focusing on integration, compliance, and customer experience.

Security Requirements: Cryptocurrency introduces unique security challenges around key management and smart contract risks that require specialized expertise.

Legacy System Integration: Connecting modern blockchain protocols with decades-old banking infrastructure presents technical challenges that need careful planning.

Scalability Solutions: Traditional providers must consider which blockchain networks to support, evaluating tradeoffs between decentralization, cost, speed, and scalability.

Regulatory Navigation

Successful entry into crypto requires sophisticated regulatory strategies:

Jurisdictional Approach: Regulations vary dramatically by country, requiring a nuanced approach to which services are offered where.

Engagement Strategy: Leading payment providers have an opportunity to help shape emerging regulations through constructive dialogue with regulators.

Compliance by Design: New crypto products should incorporate regulatory considerations from the beginning rather than as an afterthought.

Future-Proofing: Building flexibility into crypto offerings to accommodate evolving regulations will prove essential as the regulatory landscape matures.

Conclusion

PayPal and Venmo successfully introduced crypto buying, selling, and payment features to their massive user base. Visa developed infrastructure for card programs linked to cryptocurrency accounts and settlement options using stablecoins. Meanwhile, JPMorgan created JPM Coin for institutional client payments and settlement.

These success stories stand in stark contrast to failed attempts. Failed lessons have provided valuable guidance for institutions planning their crypto strategy: strategic vision, technical investment, regulatory navigation, and organizational adaptation are required for steady success.

As traditional and crypto payment rails continue to converge, several trends are emerging: cryptocurrency functionality will become an embedded feature within traditional financial services; clearer regulations will provide a more stable foundation; infrastructure improvements will make crypto more practical for everyday use; and Central Bank Digital Currencies will create new opportunities.

For traditional payment service providers, the question is no longer whether to engage with cryptocurrency, but how to do so in ways that create sustainable competitive advantages while delivering genuine value to customers.