Once a mere novelty, Bitcoin debit cards are getting smarter and their providers are stepping up to ensure their products have a tangible competitive advantage.
Like many sectors of the Bitcoin industry, the consumer payment product market is both growing and innovating at breakneck speed.
In a little under three years, Bitcoin spending at consumer level has gone from an online-only niche to offering a full range of financial products, with apps and fiat-tied options, such as gift vouchers, flooding the market.
More recently, focus has shifted to convenience rather than simply having an extension of one’s Bitcoin wallet in a familiar form. So-called Bitcoin debit cards have led the way in providing both new and experienced Bitcoin consumers with a crossover tool for the kind of transactions otherwise only possible with a fiat-based product.
The advantages of Bitcoin debit cards have been well-publicized, and range from removing the headache of finding Bitcoin-accepting merchants, to easing the amount new users need to understand about Bitcoin in order to transact successfully and efficiently.
Now, however, trends are continuing to evolve. As part of a concurrent industry inclination toward crossover services, operators such as Bitcoin exchanges and wallets are venturing into the point-of-sale arena. These extended product offerings come as a lighter version of the separately evolving Bitcoin universal services — all-encompassing features that still provide little flexibility for users of multiple services who wish to ensure they receive the best value for their money.
The Bitcoin debit card market has been active for around three years. Early projects, such as that of Hong Kong exchange ANX, sought to give international Bitcoin traders the option of having access to their funds via a balance that is topped up, much like a regular bank account. Cards even began appearing with the Visa or MasterCard logo, with coverage expanding to hundreds of thousands of ATMs globally.
Bitcoin debit cards, however, are not without their drawbacks. The main trade-off for the flexibility and convenience of an at-hand Bitcoin balance is the cost: Bitcoin debit cards, relatively speaking, are not cheap. A host of charges — ranging from loading fees and monthly subscriptions, to commission, withdrawal fees and more — all active on the same card, often makes the product appear uncompetitive in comparison to simply trading and funding a standard bank account.
Alex Schultz, CEO of exchange BIT-X, disagrees. The added benefits of an automatically-funded debit card, he says, ensure the solution justifies the costs involved. He told Cointelegraph:
“The card appeals to those who regularly trade Bitcoin for fiat, either into cash or to their bank accounts. With these methods of exchanging Bitcoins to fiat, users are often at a disadvantage due to high fees, waiting times and the inconveniences both cause. We, and many of our clients, feel that our fees are reasonable for the service provided.”
BIT-X is unique in offering a debit card with a balance that is tied to a user’s exchange balance. Regardless of the currency held, a transaction automatically initiates the sale of any available currency balance or balances to fund the point-of-sale operation without a loading fee. “If a client has already traded their Bitcoin for USD, EUR or GBP, they are able to spend the fiat through the card just as easily,” Schultz added.
With fees including a 0.05 BTC activation charge and a monthly fee for accounts showing fewer than five transactions in a one-month period, however, use of the card is not without its drawbacks. Like many operators, Schultz sees marketing maturation as key in being able to provide a more competitive environment. He said:
“In the future, we expect to see lower fees, as we partner with new banks across the world. Later this month, regarding the BIT-X debit card, we will have a new bank partner. As for fiat transfers, we will have two more partnerships with EU banks and a new credit card processing system for incoming payments during the next month. We believe that, as we partner with more banks, the debit card will appeal to a wider audience.”
While acknowledging the limitations of prepaid cards, Schultz added that BIT-X is set to offer the product in the near future, “for those who would rather fund cards in advance”, as well as a card aimed at occasional users who would otherwise be overly affected by the monthly low usage charge.