Earlier this year, Visa revealed during its last earnings call that consumers made $2.5 billion worth of transactions using their crypto-linked cards, during its fiscal first quarter of 2022. Back in July, Visa reported crypto-linked card usage reached $1 billion for the first six months of 2021. The 2022 Q1 numbers represent a 70% increase compared to all of 2021. People are using crypto-linked cards to make everyday purchases and pay for retail goods and services, restaurants, hotel accommodations, and airline tickets. The transaction growth shows that the adoption of crypto-linked cards is spreading rapidly and signals that consumers see the utility of having crypto-linked cards connected to their digital assets on crypto platforms. Visa has already signed up crypto wallet partners like Coinbase, BlockFi, and Circle and its network has reached more than 60 partners. What’s more important to note is that crypto-linked cards don’t require coffee shops, grocery stores, or restaurants to directly accept cryptocurrencies at the checkout. There is no complexity on the merchant side to accept crypto or worring about volatility.
Ilias Louis Hatzis is the founder and CEO at Kryptonio wallet.
The use of cryptocurrencies for everyday spending still remains low, however, we are seeing a slew of activity around crypto credit cards.
Visa has teamed up with over 60 crypto platforms including Circle, BlockFi, Coinbase, FTX, and Anchorage. Mastercard’s growing crypto partner network includes Wirex, BitPay, Bakkt, and LVL. Both companies are also joining forces with startups as part of their Visa Innovation Program and Mastercard Start Path Crypto accelerator programs.
This rise of crypto-linked cards is not surprising. The interest among consumers, fintech companies, and regulators is undeniable.
Driving the activity of crypto-linked cards is consumer demand. With an increasing number of users holding crypto assets, crypto payments are a natural next step.
There’s a behavioral change happening with younger digital-savvy generations. Younger generations are increasingly diverting wealth into cryptocurrencies and digital assets, especially Millennials and Gen Z.
Millennials are also sick and tired of unaccountable organizations, whether it’s a bank or web2 company, taking a large cut out of their savings. That is why they are asking for these products and in return, the market is responding and providing them.
A survey by Blockchain Capital shows that 55% of 18-34 year-olds in the US intend to buy bitcoin in the next 5 years. Much of the appeal is cultural, with highly-engaged communities on platforms like Twitter, TikTok, and Reddit sticking together around a shared mantra.
Mastercard’s New Payments Index for 2021, shows that 93% of consumers plan to use cryptocurrency or other emerging payment technology, such as biometrics, contactless, or QR codes. Forty percent of people across North America, Latin America, the Caribbean, the Middle East, Africa, and Asia-Pacific say they plan to use cryptocurrency in the next year.
According to a Forrester Research study last year, crypto adopters have an average order value of $450, compared to $200 for non-crypto users.
Spending cryptocurrency used to be a big pain, not only because few merchants accepted bitcoin for payments, but because not too many fiat off-ramps were around.
Now it’s simple. Typically when transactions are carried out with a crypto-linked card offered by a company like a wallet, that wallet converts the crypto to fiat and then sends the funds to Visa or Mastercard, who then sends the funds to the merchant’s bank for the appropriate amount and in the correct currency. Visa through a partnership with Anchorage, a federally chartered digital asset bank, can now accept USDC (a stablecoin pegged to the US dollar), instead of fiat, from wallet companies.
By enabling millions of consumers around the world to spend digital assets with a swipe of a card or smartphone, Visa and Mastercard are striking a big blow to traditional financial institutions when it comes to payments.
We can also expect crypto and bitcoin volatility to fall over the coming years. Micro-payments, credit card rewards, and gaming will form the base of the pyramid and a consistent source of demand.
Digital payments such as cryptocurrency have the potential to disrupt $18 trillion of annual consumer spending with cash and checks.
While crypto wallets were primarily used to store and trade cryptocurrencies, people are now using them to pay for things. Crypto wallets increasingly have the potential to become super apps, ingrained in consumers’ daily lives and making your crypto wallet address as important as your mailing address.
Subscribe by email to join the other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research.
