The announcement by major issuers Visa and Mastercard that their networks would no longer be used to pay for cryptocurrencies or fund e-wallets prompted outrage in the industry. Users can no longer load their crypto wallets with credit cards as a result of the processors’ decision, and many speculated that this would have an impact on card issuers as more people entered the crypto market.
While it’s too soon to know the long-term consequences of the issuers’—as well as multiple financial institutions’—decision, it’s possible that damage has already been done. Since the restriction was announced in the first quarter of 2018, Mastercard has faced small losses, according to a recent earnings call. The outcome, while not definitive, is indicative of cryptocurrencies’ growing appeal as a payment mechanism and illustrates that people are looking for innovative ways to incorporate these unique solutions into their daily lives.
Due of its growing popularity, the crypto community has devised its own alternative in the event that credit card companies continue to oppose it. Crypto debit cards are a new payment option that makes the process of changing bitcoin to fiat to pay for everyday items and services much easier. Because credit card issuers and banks are adamantly opposed to including cryptocurrencies in their future plans, the burgeoning new sector may be able to gain traction by providing a more comprehensive ecosystem.
The Present Situation of Crypto Cards
The demand for crypto cards as a real-world payment method arose from the field’s need to be more accessible. They are pre-loaded debit cards with bitcoin that may theoretically be used on existing payment networks like Visa and Mastercard. When paying for products and services, the cards convert the necessary quantity of crypto to fiat.
Wavecrest, one of the most talked-about crypto card initiatives, promised to deliver on that promise. Until its services were outlawed by Visa, whose terms and conditions are famously harsh and vary depending on countries, the company was a key provider for other issuers. The announcement was shocking for many businesses and individuals, as it wiped out their investments and restricted their use of cryptocurrency once more.
Despite this, the sector has demonstrated resiliency and continues to create technologies that may lessen the friction associated with cryptocurrency transactions. There are new options on the horizon that could function inside the compliance frameworks of big processors. Wavecrest’s access to Visa was terminated not because of its cryptocurrency background, but because of its violations of operational standards, according to Visa.
TokenCard, for example, intends to take a more end-to-end approach to developing a payments ecosystem. The platform allows users to keep their tokens in a single wallet and gives them complete control over their allowances while also offering a variety of payment methods. Additionally, via its Token app, the company has designed a simple and efficient management tool that allows customers to manage their portfolios straight from their mobile devices. In January, the business declared that it had found a completely compliant partner for issuing global cards.
Others, like as the privacy-focused Verge, are gaining traction through more traditional relationships. The startup announced a cooperation with TokenPay and WEG Bank in Germany that will allow it to distribute its XVG tokens as a debit card. By gaining acceptability across Europe, the agreement would allow XVG to reach critical mass.
Some of the entries are further along in their development, such as Wirex’s offering. The company already has a popular card and is fast extending its ecosystem by offering a rewards program that is similar to regular credit cards but with a more open basis. Crypto cards could reach a wider audience and achieve a greater foothold despite their smaller scale by delivering better services than the present market leaders.
Taking on Industry Leaders
The issue for most card issuers isn’t that large processors are anti-cryptocurrency. Nonetheless, it indicates a more aggressive attitude toward cryptocurrencies in general. When you consider that Visa and Mastercard said in the first quarter of this year that they were prohibiting the purchase of cryptocurrencies with credit cards, it’s no surprise that some people are abandoning the idea of dealing with these firms.
Some processors are seeing a demonstrable, albeit slight, impact from the flood of anti-crypto actions made by banks and other issuers. Mastercard, for example, saw a 2% decline in quarterly cross-border volume increase as a result of their prohibition on crypto sales. Taking on Visa and Mastercard, regardless, will necessitate a mix of compliance and disruption. Crypto cards require exposure and, ultimately, superior fungibility to obtain broader adoption than bank-issued credit cards.
Visa has stated that it will continue to provide processing services to crypto card issuers. Thousands of consumers were left without cards when Wavecrest was stopped, demonstrating the company’s tough stance on rule-breakers. Despite this, businesses are looking into new alliances and issuers that work within processors’ frameworks. Crypto cards will remain a niche market solution for the time being. They could eventually compete on the same level as the traditional market giants before leaving them in the dust if they continue to produce more complete, usable, and compliant services.