Top 5 Things You Should Know Before Launching a Crypto Card

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It seems like a new crypto credit card is being announced every other day.

In March 2020, Uphold became the first multi-asset debit card to seamlessly convert cryptocurrencies and precious metals instantly to fiat at the time of a transaction. As of October 2021, BlockFi, the world’s first bitcoin rewards credit card, announced that it was on track to hit $2 billion in annualized spend. Salt announced a crypto collateralized card that has been waitlist-only for almost a year now. Bold announced a bitcoin-collateralized credit card in mid-March. The Nexo card had a waitlist of 484,353 people as of March 24, 2022 (according to its landing page, which is likely not an accurate counter, but hey, maybe).

If you’re itching to get into the crypto card product game, here are the top five factors you should consider before quitting your day job.

1. Understand why your target user wants a crypto card

We receive a lot of inbounds from founders who say,

“We know so and so NFT holders, and they said they would sign up for our card if we put it on the market.”

I never doubt that these founders have received positive affirmation for their card ideas, but I always follow up with,

“Do you know why those users feel so strongly about signing up for your card? What problem are you solving for them?"

There are several distinct problems that can be solved with crypto cards, and it’s important to know which of these problems you’re solving and for whom. Depending on the answer, your business may have very different risk factors and requirements.

User Problem

Target Audience

Questions to Consider

I have too much capital tied up in crypto assets

  • Typically higher income or based in the U.S.
  • Already has access to traditional lines of credit but wants to additional access to liquidity
  • Can you take on the risk of having a fairly homogeneous, concentrated user base?
  • What can you do if the value of the underlying asset crashes?

I don’t have access to traditional lines of credit

  • Non-U.S. citizens or young professionals who don’t have established credit history
  • How will you evaluate risk associated with onboarding users who are not U.S. citizens or who do not have robust credit history?

I want to show people that I’m part of _(insert NFT name)_ community

  • Users are typically distributed globally
  • Users enjoy brands that reflect their lifestyle and values
  • Does your business model depend on transaction volume? If so, will these users actually use your card, or do they want the card purely for “bragging rights?”

I want an easy way to accrue crypto rewards, and an easy way to grow those rewards through staking done automatically by the card issuer

  • Users are interested in DeFi opportunities but are not fully educated on how to take advantage of those opportunities
  • Not fully invested in or bought into crypto
  • Are you prepared to file with the SEC in exchange for offering yield via staking?
  • How will you mitigate risk associated with leveraging DeFi protocols?

I want to pay with stablecoin or crypto

  • Users who are already very active in crypto and DeFi. Early adopters of tech.
  • Do you have the ability to design and execute smart contracts to power on-chain transactions?
  • Are you willing to wait for merchants to be able to settle directly in stablecoin or crypto?


2. Figure out which pieces of the puzzle you want to outsource.

Traditional card products involve a plethora of players – acquirers, processors, banks, printing facilities, etc. Despite the DeFi ethos of reducing inefficiencies and cutting out middlemen, crypto card products are significantly more complex. For crypto card products, you’ll likely need to determine which processes and functions you’ll want to handle in-house vs. outsource. For example:

  • Will you build your product’s onboarding UX from scratch or will you leverage a white-label solution? (Apto offers a white label mobile app SDK so you don't have to build from scratch.)
  • Will your business provide a line of credit, or will you need a third party debt capital partner like Onbo?
  • Do you want to maintain your own ledger, or do you want someone else to manage your ledger? 
  • Will you conduct your own KYT (Know-Your-Transaction) or will you use a provider such as Chainalysis?
  • If you’re offering staking and rewards, will your team manage staking with various DeFi protocols in-house, or will your team manage a more limited set of staking protocols via third party such as Zerohash?

3. Choose the right card program for your use case.

Not all use cases require a credit card. If your primary goal is to provide easy access to crypto balances, then debit cards might be your fastest way to market. However, if your primary goal is to extend credit, then you should consider whether true credit cards or charge cards are most appropriate for your target market and use case. For example, if your target market is simply looking for a way to access liquidity rather than premium rewards, then a charge card can offer a monthly credit line to users while eliminating the need for your business to deal with revolving balances, interest rates, and high capital requirements.

4. Interchange should not be your only source of revenue.

At Apto, we follow our own advice and it’s the reason we provide a generous split of interchange revenue with our customers. Interchange revenue should not be your only or largest source of revenue. First, debit interchange revenue has decreased by roughly half since the Durbin Amendment was passed and it looks like there are several Congress members who wish to apply the Durbin Amendment to credit interchange as well. Second, in a world where traditional payment networks such as Visa and Mastercard are replaced with decentralized blockchain transactions, the concept of interchange revenue may disappear completely.

What service are you providing to either merchants or consumers and are they willing to pay for that service? If interchange revenue is the only way to sustain your business, then it’s probably an indicator that you haven’t quite nailed down a strong value proposition for your users yet.

5. Before you can launch, you’ll need a sponsor bank. This is not easy.

There are about 5,000 banks in the United States, and only five to ten of those at any given time are willing to sponsor new fintech card programs. These five to ten fintech-friendly sponsor banks are likely names you’ve never even heard of. 

Why is it so difficult to secure a sponsor bank?

  1. Banks are not the business of revenue generation. They are in the business of risk mitigation. If you’re a startup with no track record and no data about your prospective users, then there’s not much incentive for banks to take on the risk of sponsoring your program, especially when bank presidents can be held personally liable in civil or criminal suits involving your users. (Most D&O insurance policies exclude bank executives from many protections.)
  2. Banks prefer to have a diversified portfolio of programs they sponsor. Therefore, even if a bank sponsors another card product that is very similar to yours, they may reject your program simply because they have reached their threshold for sponsoring similar card products.

Apto Payments is a one-stop shop that partners with sponsor banks, payments networks, processors, and many others to launch some of the most innovative card programs. If you’re interested in learning more about how Apto can help launch your card product, reach out to us here.

Notes: Crypto backed lenders have seen significant traction over the last five years and crypto collateralized credit cards seem like the logical next step for the industry. In 2018, Salt shared that it had a $1.3 billion backlog for loan requests and 60,000 members willing to extend loans. In 2022, Milo announced the first U.S. crypto mortgage and stated that their mortgage solution for foreign nationals received applicants from 63 countries.

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