Why crypto cards may disappear. Expert opinion
Cryptocurrencies have advantages over traditional payments to both parties, but the payment process is not well established yet. It is more convenient for consumers to pay in their usual ways: through payment systems, card or services such as Apple Pay and Google Pay.
More and more companies are interested in connecting crypto payments for their store. And one of the solutions that allows you to do this is crypto cards. Let’s understand what crypto cards are, how they differ from regular debit / credit cards and whether they are worth using. A professional look from a specialist at Amir Capital.
What are crypto debit and credit cards
In terms of functions, crypto cards are no different from ordinary debit and credit bank cards. The principle of their work from the point of view of the client is as follows: you can pay with a crypto card for goods in a store through a PoS terminal in a contactless way and via NFC or on the Internet by linking the card to the store or using the services of Apple, Google, Samsung Pay.
How crypto cards appeared
The need for crypto cards arose when many users became interested in crypto payments, but there were no suitable services for this. In addition, the counterparties bore risks. If you pay for goods on the Internet directly from a crypto wallet, the seller could simply deceive and not send the goods. And since the wallets are anonymous, the police can do little to help, since it is extremely difficult to track the real data of the seller on transactions in the blockchain.
On the other hand, users had to exchange cryptocurrency for fiat through intermediary services, which takes time and incurs costs when exchanging and withdrawing funds.
One of the first Shift Card crypto cards was issued by the well-known crypto exchange Coinbase. The card deducted the purchase amount from the balance of the wallet linked to the card, but there were restrictions: a maximum of $ 1000 for daily expenses and $ 200 for cash withdrawals from an ATM.
How crypto cards differ from ordinary bank cards
Basically nothing. The only significant difference is the combined accounts. Thanks to this, with the help of cryptocards, you can pay for purchases with both cryptocurrency and fiat currencies.
Why use crypto cards
This is convenient, since you do not need to convert the cryptocurrency manually, which takes a lot of time. Now everyone can use digital assets for everyday purchases and paying bills by combining them with foreign currency payments. Some services even offer analogs of banking services, such as deposits and lending, for cryptocurrencies. For example, you can open a deposit in cryptocurrency or use it as collateral and take out a loan like in a bank.
Crypto cards are not tied to any currency, so you can freely exchange crypto assets for any foreign currency: USD, EUR, RUB, GBP, JPY and any others. In one wallet, you get access to currencies and digital assets at the same time.
How crypto cards work
Consumers use crypto cards in the same way as ordinary ones. But they work a little differently if you pay for a product or service with cryptocurrency. As with banks, crypto cards have a shared account for digital assets and currencies. To this account, you need to deposit cryptocurrency from your wallet, after which payment in cryptoassets will become available.
When you pay for a purchase in a store with cryptocurrency, it is automatically converted to fiat currency that the retailer accepts. You can make any payments: pay for a taxi, utilities, buy air tickets, coffee or rent a car. Simply put, crypto cards are basically just prepaid cards. They work identically.
Why crypto cards have no future
It would seem that it is convenient to use them: we use cards, regularly pay for goods with them, transfer money from them. But what is wrong with them?
Firstly, you do not pay with cryptocurrency directly, but convert it upon payment by paying a commission to the provider. Therefore, goods paid for with cryptocurrency will cost more. It’s just convenient, because you don’t have to manually exchange cryptocurrency, although you will have to pay more for it.
Secondly, cards are gradually becoming a thing of the past. They are not safe, they may deteriorate, or you may lose them. Attackers can steal money from them if you are in a crowded place using a PoS terminal. And if you lose, then the person who found the card can use your money. Many people use smartphones with NFC chips to pay. It is convenient and your smartphone is always at hand. And, besides, it is safe: cybercriminals will not be able to withdraw money through the phone.
But if you dig deeper, then the cards themselves are not necessary. You can pay for purchases even more conveniently, for example, by scanning a QR code at the checkout or in an online store through a wallet. And in one wallet, you can store many different assets: both cryptocurrencies and fiat. No need to hold cards, memorize CVV-code, enter a long card number every time – scanned and paid.
Another disadvantage of crypto cards, which regular cards also have, is the set limits. Banks set limits on spending and transfers, replenishment and maximum balance. Some people who work with a large cash turnover, because of this, have to have several cards or create special accounts and pay extra for the service. If you use a crypto wallet, you can spend without restrictions, and if you receive a large amount at one time, the account will not be blocked until it becomes clear where the money was received from.
Service fees are another drawback of crypto cards. Cryptocurrency wallets are free. You can use several crypto wallets, and not pay for any of them. Banks provide free service, but if you fulfill the conditions, for example, every month you pay for purchases for a certain amount or the balance is stored on the card.
Someone may argue that you can get cashbacks with cards, and therefore they are better. Let’s object, and here’s why:
1. If the cashback comes from the bank, then there is no need for it. Banks pay users not out of their own pockets, but partially returns the commission from the payment. If you eliminate the commission, the goods will become cheaper.
2. The store, within the framework of promotions, can charge cashback anywhere: it does not matter, to a crypto wallet or a card. In the end, nobody canceled the system of discounts, and cashbacks are simply not needed – these are nothing more than marketing gimmicks to get consumers to spend more, creating the illusion that they are benefiting from it.
That is why cryptocards should disappear, and convenient and secure mobile wallets should come in their place, with which you can store cryptocurrency and pay for purchases with it.