How a Spread Is Constructed
In financial markets, a spread is the difference between the buying price and the selling price of an asset — the bid-ask spread. Market makers earn this spread by simultaneously quoting both a price at which they will buy and a slightly higher price at which they will sell. Payment gateways apply an analogous markup: they source crypto at the market mid-price (or slightly below, depending on their liquidity relationships) and apply a percentage markup when calculating the conversion rate they offer to merchants.
A gateway quoting a 1% spread on a Bitcoin conversion when Bitcoin is trading at €40,000 mid-market will use an effective rate of approximately €39,600 for its merchant conversion — the merchant receives €39,600 worth of fiat per BTC, not €40,000. The €400 difference per BTC is the spread revenue retained by the gateway. For a merchant receiving €10,000 equivalent in BTC daily, a 1% spread costs approximately €100 per day.
Spread vs. Transaction Fee — Why the Distinction Matters
|
Cost Type |
How Charged |
Visibility |
Typical Range |
|
Transaction fee |
Explicit percentage or flat amount |
Clearly shown in fee schedule |
0.5%–2.0% |
|
Conversion spread |
Embedded in exchange rate — not listed separately |
Hidden in the rate comparison |
0.3%–2.5% |
|
Network fee |
Blockchain-native, variable |
Sometimes shown, sometimes absorbed |
Varies by network |
|
Settlement fee |
Per bank transfer |
Sometimes shown |
€0–€5 per transfer |
Gateways with low headline transaction fees frequently make up the margin through wider conversion spreads. A gateway advertising 0.5% transaction fees but applying a 2% spread has a total effective cost of approximately 2.5% — higher than a competitor charging 1.5% with a 0.5% spread. Merchants evaluating gateways on fee alone without comparing the actual conversion rates offered will systematically underestimate their true cost of acceptance.
How to Measure the Actual Spread Being Charged
The most reliable method is to compare the conversion rate offered by the gateway at a specific moment against the mid-market rate for the same pair from a neutral reference source (CoinGecko, CoinMarketCap, or a major exchange's real-time API) at the same moment. The percentage difference between the gateway's rate and the mid-market rate is the spread, net of any separate transaction fees.
This comparison should be done at several different times of day and on days with both high and low market volatility. Some gateways widen their spreads during periods of high volatility to compensate for the increased risk of holding inventory between customer payment and gateway conversion. A gateway that advertises a fixed 0.5% spread but widens to 2% during volatile periods is materially more expensive during the periods when merchants are most likely to care about price certainty.
Negotiating Spreads at High Volume
Spread rates are not fixed for all merchants. Most payment gateways offer tiered spread structures where merchants processing above defined monthly volume thresholds receive reduced spreads. A merchant processing €100,000 per month might pay a 1% spread while one processing €1,000,000 per month pays 0.4%. Merchants approaching a volume threshold should proactively negotiate spread reductions rather than waiting for the gateway to offer them. Enterprise agreements often include custom spread schedules that are not published in standard fee documentation.
Compliance Note: This glossary entry is provided for general educational purposes only and does not constitute financial, investment, legal, or tax advice. Industry terminology may vary across jurisdictions and providers; definitions herein may not directly reflect the specific features, terms, or specifications of Finassets' services. For details on Finassets' offerings, please refer to official product documentation or contact our team directly.