Cryptocurrencies and the technologies that support their use as a payment method have matured, to the point where they are now disrupting traditional transactional models and established processes.

While the debate rages on whether Bitcoin, Bitcoin Cash or perhaps another cryptocurrency will someday become the single global currency, they are already reframing our thinking around the role of traditional custodial financial services providers.

A traditional financial institution, like a bank, acts in a custodial role, effectively holding a customer’s assets, either in electronic or physical form, while the client maintains ownership of those assets.

In terms of money, this equates to the bank holding a client’s cash deposits to safeguard against theft or loss. Other services can then be provided, such as the ability to transact with that money via a bank-issued card, electronic funds transfer (EFT), cross border payment, or a mobile payment via a linked app.

Credit card payment processing providers fulfil a similar custodial function. However, the regulatory compliance requirements make it administratively onerous for a merchant to implement these forms of transaction enablement, which adds friction to the process and unnecessary layers of complexity, compared to simply setting up a cash till. To make this transactional model viable, a business or online content provider also needs to achieve a certain degree of scale.

To find a suitable alternative, many are looking to cryptocurrencies to disrupt the prevailing payment paradigm. In this regard, many crypto wallets function as a custodian, as the service provider holds a client’s coins in a hot wallet, as well as the private key. In effect, the service provider holds cryptographic control over the client’s cryptocurrency and only a username and password are required to access their digital currency and authorize transactions.

…a new breed of non-custodial payment processing services are starting to revolutionize this payment paradigm

Conversely, non-custodial cryptocurrency services – like Blockchain.com, bitcoin.com, Yours.org, and Cointext – allow the user to keep their private key and their coins. This means they have more control of their cryptocurrency.

As such, cryptocurrencies and a new breed of non-custodial payment processing services are starting to revolutionize this payment paradigm. Non-custodial applications such as The Money Button from Yours.org solve the flow rigidity issues inherent in peer-to-peer (P2P) payments.

This enables the payer and the recipient to transact directly with one another, effectively stripping out all the admin-intensive and bureaucratic middle layers that create the complexity and friction inherent in most other financial transactions. This results in more efficient payments, a better customer experience, and lower costs for users and merchants.