Some people dream of buying a Lamborghini with their crypto; others are just looking to get some pizza delivered.
And while that last one might not take 10,000 BTC anymore, given the problems crypto holders still have when trying to spend their funds in their local economy, it can sometimes feel like it does.
Could your wallet actually make it easy to spend crypto holdings on everyday purchases, whether at the grocery store, the hairdresser, or even the car dealership? With Kulipa, the answer is yes.
But whether that happens through a prepaid card or a debit card depends on some characteristics of your wallet. And making the right decision between one or the other is fairly important, as implementing a card is a resource-intensive process.
How do you know which solution is right for you?
What’s the difference between a prepaid card and a debit card?
Let’s take a moment to define what we’re talking about.
- Whenever a user pays with a debit card, the funds are moved directly from the wallet to the merchant. It provides a seamless purchasing experience and can thus encourage more daily use.
- A prepaid card works the same in the moment of purchasing something, but prior to paying with it users need to put funds in a segregated wallet that the card issuer – Kulipa – owns. They can only pay using those preloaded funds, which can be fine for many scenarios but also means a bit more friction for the end user.
Keeping that high level view in mind, let’s dive into the two options to look at the types of wallet they fit best.
What criteria are a good signal for issuing crypto debit cards?
- Goal - Delighting users: Some wallets are more focused on the user experience than others, whatever their reasoning. Debit cards are great for these, as they take away the friction of needing to regularly add funds to the card. Users simply have a card that’s always connected to their wallet, ready to use whatever funds they have there. So while they take more resources to set up, debit cards do operate much more smoothly once they’re in the users’ pockets.
- A scaled team: Issuing a debit card takes a certain amount of time to implement. We’re not talking in terms of years, but we are talking about a few months. Aside from validating the program with Visa and/or Mastercard, card production, and BIN issuance, a debit card is technologically delicate to implement. For example, we need to prevent double spending (to avoid authorizing a transaction and then having the user empty their wallet before the funds are actually pulled for settlement); this requires some tailored solutions for each wallet, depending on their infrastructure. Having engineers and product people ready to commit fully to launching a debit card is very important to have a smooth launch.
- Available budget: Issuing a debit card is a real process, including many different stakeholders (we covered this in a previous article). As the card issuer, Kulipa handles most of the heavy lifting, from project management to technical integration in our implementation fee. Then there are some costs that come with launching the card program itself: creating a dedicated BIN, implementing the design for the manufacturer and card network, shipping physical cards… When it’s all totaled up, creating and issuing your brand’s debit card is a five figure matter. For this reason, a debit card can be better suited for wallets with a live product and growing traction.
What criteria are a good signal for issuing crypto prepaid cards?
- Goal - Testing the waters: Prepaid cards are a great way to get a foot in the door with card products. They’re a standard and fast way to test users’ appetite for payments. Once you’re convinced that it works, it’s always possible to upgrade to debit for a superior experience.
- Easy implementation: Because prepaid cards always have the same mechanism, there is less tailored work to be done and thus lower implementation fees. There are still some project management aspects that need to be handled – card design, program validation, etc. – but the total cost is always going to be lower than with a debit card program.
- Speed over UX: There are similar savings in time to market and implementation. As the technical setup is standard, a prepaid card can be live just a few weeks after agreeing on the terms.
The virtuous circle of crypto cards
For wallets that start their own card program, whether debit or prepaid, there’s a relatively tight feedback loop that shows why adding the powerful experience of global crypto spending for your users can take your wallet to the next level.
- Higher retention, generated by daily wallet use. By enabling crypto to be used everywhere, you’re creating the best possible situation for frequent card usage, leading to increased retention and mindshare. Seeing people pay with a card branded with your wallet’s name also contributes to organic acquisition, further growing your wallet usage.
- New revenue streams, enabled by significantly more fund movement. By entering the card transaction flow, wallets can access part of the standard interchange fees (from 0.5%-1.5% of the total price) paid by merchants at each card payment. Additionally, Kulipa only handles stablecoins; this means that Kulipa card users holding only BTC (for example) will have an exchange from BTC to USDC when making a payment, generating in-wallet DEX fees. The same goes for bridging, if there aren’t enough funds on the chain used by the card for payment.
- Additional product features that can be built on top of the card program: cashback, loyalty programs, quests, points, airdrops, etc. This can have benefits in terms of product, marketing, customer service and more. Working together, your teams can deliver an experience that brings you right back to having more customers using their wallets on a daily basis, letting the whole cycle start back up again.
In conclusion
- Prepaid crypto payment cards are easier and more affordable to set up, but include an intermediary step (topping up funds on a separate wallet) that creates a bit more friction for the user.
- Debit crypto payment cards take more time and resources to get up and running, but can create a seamless user experience that matches the typical “pull out my card and tap it on the machine” experience that users expect from traditional finance, eventually leading to even more fund movement.
For crypto wallets that want to issue their own branded debit cards, there are some technical questions that always come up: How do funds move between various players? How do you prevent double spending? What do security and permissions look like?
In our next article next week, we’ll explain just that for our debit card! And no matter which option feels like the right one for your wallet now, be sure to follow us to stay up to date on how Kulipa’s bringing the power of crypto payments to users around the world.
