Card payments with cryptocurrencies?
BitPay has it, Binance and BitPanda as well, Wirex and Crypto.com anyway — credit cards enabling card payments with cryptocurrencies. They are seen as the means to quickly turn payments with cryptocurrencies at the point-of-sale (POS) into something socially acceptable and widely available.
At Salamantex, we very much welcome this development, as we ourselves are committed to driving the integration of digital assets into payments. To this end, as a provider of solutions that enable companies to accept cryptocurrencies directly, we should shed light on the different approaches in detail and assess the advantages and disadvantages of this new trend.
What is a crypto-backed card?
A crypto-backed credit or debit card is a card allowing users to indirectly pay with digital assets such as Bitcoin or Ether. Select product, trudge to the (virtual) checkout, and whip out the card. Then, at the payment step, simply enter the data via swipe or tap and the cryptos flow to the merchant. Well, it’s only that simple on the surface.
When you pay with a crypto credit or debit card, you don’t pay directly with digital money; instead, when you use it, digital assets are exchanged for local currency and then transferred to the merchant as a normal card payment.
The source of funds is an existing account of an exchange like Binance or a mobile wallet like Wirex, with integrated cryptocurrency wallets and a linked bank account.
What are the pros and cons of cryptocurrency cards?
No more depending on your smartphone’s charge. Cards are usually easier to have on hand. Not every payment transaction needs to activate an app. It’s often more convenient.
A shallow learning curve. The entry point for paying with digital assets happens via a credit card — a format familiar to almost everyone. Often, just creating a crypto wallet is a big hurdle, then constantly opening it to pay may not be a problem for professionals, but others will be more comfortable with the card. No one has to say goodbye to previous habits.
A hurdle may be limited availability. Even though credit card acceptance is known to be far ahead of cryptocurrency acceptance, not all crypto cards and services are accepted in all regions of the world, which can unpredictably limit the ease of use for crypto card owners. For example, Bitpanda’s card is only valid for use in Austria. If you want to use crypto-backed cards in different parts of the world, you will need cards from different providers to be able to pay for goods and services with digital assets this way worldwide.
Not for everyone. Even though the solution seems very attractive at first, for a large portion of current crypto users it lacks a crucial property: sovereignty. Due to the need to convert the balance into fiat (€, $, ..) before paying with crypto-backed credit cards, it is not possible to use non-custodial wallets of which a user owns the private key.
Thus, with crypto cards, one never gets around entrusting the power of disposal of one’s digital assets to a service provider, a major shortcoming after this independence is often at the heart of cryptocurrencies themselves.
Hidden costs. Even if crypto card providers suggest otherwise with loss-leader offers such as perks for Netflix or Spotify, cashback, and much more: Using a crypto card can be surprisingly expensive compared to using other cryptocurrency payment methods. For every purchase made with the card, the end user incurs exchange fees and often service fees. In the medium term, these costs add up and are noticeably higher than the fees charged by conventional credit cards; this becomes clear when comparing all the added up fees incurred for both merchants and end customers together, which can quickly range from 2–7% for crypto card payments.
So what to do if I, as a business, want to accept digital currencies now?
As with traditional credit or debit cards, crypto cards can be accepted with the credit card payment terminal already installed. This makes it the easiest option for the merchant to accept digital assets, at least indirectly.
At Salamantex, we believe it is more future-proof to integrate digital assets directly as a payment option, thus ensuring the independent use of digital currencies for merchants and end customers in the long run. This is done by embedding software-based system extensions in the payment terminal or in online stores themselves. The largest possible number of end customers pay with the wallets and cryptocurrencies of their choice without additional service fees, and the merchant receives the digital currencies directly and securely and can keep them as well as optionally exchange them into more stable currencies such as Euros to be transferred on to his business account.
And the consumer also benefits: There are no additional fees for him apart from the transaction fee of the respective crypto network, he he is aware of the applied exchange rate, and can assume to be able to pay at any merchant accepting cryptocurrencies.
