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What is Flexa? How Chipotle and Crypto Make Sense

tl;dr Summary: Chipotle and crypto may sound like an unlikely pairing but the use of blockchain technology in the food service industry couldn’t be more perfect. With traditional payment processors charging up to 4% in transaction fees, restaurants have long looked for methods to reduce costs at checkout. Flexa, a blockchain payment processor, offers restaurants a 1% transaction fee.

At the beginning of June Chipotle announced its nearly 3000 stores would now be accepting crypto at all its locations through Flexa. Chipotle is now part of an ever expanding list of restaurants that are experimenting with cryptocurrency as a payment and potential promotional play.

Over the last couple of years, restaurant chains such as Shake Shack, Starbucks, Quiznos, Pizza Hut, Burger King, and a myriad of others have begun testing or rolling out crypto as a payment option. The addition of crypto as a payment option for many of these companies is in their best interest. It engages a customer base that is highly enthusiastic and easy to promote potential deals to. 

But as blockchain technology improves, restaurants look to crypto for more than just an interesting marketing headline. There are real cost benefits that restaurants are seeing in crypto. While traditional payment processing fees have been notoriously high, blockchain companies’ streamlined payment processing systems’ low fees are beginning to look like viable cheap alternatives.

With all this in mind, let’s explore how expensive traditional payment processing is, how expensive Flexa is, and what is next for blockchain payment processing companies.

The Incentive

Have you ever gone into a store and wondered why they have a $5 minimum to pay with a credit card?

It isn’t uncommon for restaurants and stores to enforce such restrictions on its customers due to the expensive fees payment processors extract. Stores can be forced to pay up to 4% for a transaction. These rates tend to be higher for restaurants or high volume and low margin businesses which are disproportionately impacted by flat rate costs built into payment processing fees.

Because of this, restaurants are highly incentivized to reduce payment margins because the ability to reduce payment fees on transactions by even 0.5% percent could represent a substantial increase in what the business takes home in profits. Blockchain payment processors such as Flexa offer payment processing on the blockchain for a fee of less than 1%.

How Traditional Payment Processing Works

So we can agree that traditional payment processing is expensive and blockchain payment processors such as Flexa provide a compelling story of how to fix that. But how does it work and why can they offer such a low rate? To understand that, we need to look at the confusing network and cycle that supports traditional payment processing. The process is as follows:

  1. Transaction Initiated
  2. Point-of-Sale System (POS) Sends a Transaction Request
  3. Transaction Routed to Card Association
  4. Transaction Routed to Bank
  5. Transaction Reviewed
  6. Transaction Approved/Denied
  7. Transaction Authorized
  8. Settlement Instructions Sent
  9. Transfer Request Initiated
  10. Funds Flow to Payment Processor
  11. Funds Transferred to Merchant’s Account

Where Merchants are Charged

If it took you a little white to digest all the above, you’re not alone. For any in-person purchase, this esoteric system has over a half a dozen parties involved. On top of all of this, each party takes a little bit of money along the way for their service. How much exactly? Well you can breakdown these payments into the following components:

  1. Customer’s Bank Fees: The fee charged by the customer’s bank for carrying the risk of the approved transaction. These are known as Interchange Fees
  2. Card Fees/Merchant’ Bank Fees: Amount taken by the Credit Card Network and Merchant bank for helping out with the transaction. These are known as Assessment and Merchant Bank Fees
  3. Processor Fees: Point-of-Sale system and Payment Processor (which are often the same party) take or share their transaction fee. These are known as Authorization Fees

These fees can packaged in the following ways:

  1. Flat-Rate: Set amount paid for all these fees that are spread across these parties
  2. Interchange Plus: Fees for Card, Merchant’s Bank, and Processor are grouped together and customer’s bank is charged separately from this package
  3. Tiered Fees: Fees charged based on the type of transaction being processed (i.e. in-person, online, or over the phone) as each payment method comes with different levels fraud risk

As a result, final transaction fees breakdown can look something like this for a Interchange Plus example: 

Transaction Fees =  3% (Customer’s Bank Fee + Card Fee + Merchant’s Bank Fee) + $0.20 (Processor Fee)

The Flexa Fix

So then, how does Flexa fix this system? 

Well, it does it through blockchain technology. Instead of having over a dozen parties involved, Flexa is able to limit the amount of parties by using blockchain as the payment processor. Instead of an 11-step process to resolve a transaction, Flexa’s payment processing network can complete a transaction in less than 5. 

Instead of going through the complex tree of Payment Processor, Card Network, Customer and Merchant Bank, Flexa’s blockchain technology makes it so only the POS system, Flexa, and the Merchant’s bank need to be involved. This simplification significantly reduces the costs associated with a transaction and speeds up the process so funds settle near real-time efficiency.

As a result, final transaction fees breakdown can look something like this: 

Transaction Fees =  0.9% (Flexa and Parties’ Fee) + 0.1% (Crypto Conversion Fee)

With support for over 98 digital currencies, including bitcoin (BTC), ether (ETH) and solana (SOL), Flexa provides a diverse range of payment options to customers making the user experience of crypto significantly better.

What’s Next

Flexa and blockchain payment processors are revolutionizing the way transactions are being done by taking advantage of new web3 technologies. Not only does this model benefit the merchant but it also benefits the customer, providing better margins and faster processing to users of the new system.

In the summer of 2021, only about 1% of restaurants accepted cryptocurrency. In the next two-years, that number is expected to increase by 4x. And with restaurants like Chipotle and easy to integrate systems like Flexa starting to prove their value, that number is likely to increase exponentially.

With nearly 85% of retail sales being in-person, including the impact of COVID, crypto and blockchain technology stands to dislocate expensive traditional payment processors in a way that has never existed before. With the US considering their own Central Bank Digital Currency, it isn’t hard to see why merchants are beginning to consider adopting crypto payment options. 


  • Willy is Venture Capitalist focused on emerging technology. When he isn't reading up on cool companies you can find him learning to pole dance.

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    • As per Willy, the author:

      They do! It used to be called Flexacoin but they migrated to a new coin called AMP. It is traded on popular exchanges like Coinbase and is used as a collateral coin to help facilitate same day settlement of transactions.

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