Bitcoin continues to confidently make its way to mass adoption. The replication of traditional financial system elements was always an unavoidable attribute of this process; and finally, it came to debit cards.
Someone thinks that entering debit cards makes intuitive sense in terms of making Bitcoin spending mainstream; someone thinks of it as of temporary solution in a way to something more. We've explored, what makes this market tick and how will it develop in the near future.
Small, yet impactfulBitcoin debit card market is quite new, and there's not really much to tell about its history. It's commonly assumed that everything started in 2014 - back then, mass media talked about Xapo, the company that debuted with first Bitcoin debit card. Soon, it was no longer something unique: the niche started growing dynamically, and already in this year the segment became diversified enough to offer the opportunity to choose among many various solutions. Today, more than 20 companies provide Bitcoin debit card services for tens of thousands cardholders across the world.
The launch of an owned Bitcoin debit card was also the initial idea of UK-based financial solutions provider Spectro Finance. The company came up with this idea probably earlier than anyone else in the market, in 2013.
However, the first two years of the company's activity were dedicated to something different: implementing two separate projects. The first of them is Spectro Coin, a Bitcoin exchange with a Blockchain-based wallet and risk-free merchant solution: the exchange service which allows integrating Bitcoin in any business with 25 000 EUR no-fee limits. The second one is SpectroCard - a virtual Mastercard-based prepaid card, which is claimed to be one of the most flexible and cheapest payment card solutions for European market.
Spectro Сoin debit card was introduced two years later, in early 2015; by now, the company managed to issue more than 20,000 cards for more than 120 countries. Being quite a flexible solution, the card is accepted anywhere where Visa and Mastercard are supported; so, users can withdraw and spend their funds in millions of ATMs, websites and shops across the globe. Besides of Bitcoin, SpectroCoin card provides support of dollars, euros, and pounds; also, one of key advantages of the card is instant funding, so owners don't have to exchange Bitcoins in advance.
Privacy is not an optionEven though Bitcoin debit cards is the best solution for direct Bitcoin spending so far, nobody tells it's an ideal one, there are some substantial disadvantages.
Anonymity have always been one of the most important Bitcoin features. That's why it may seem paradoxical that the situation with Bitcoin debit cards is opposite: absolute privacy is simply impossible here.
"As long as debit cards - Bitcoin or otherwise - are connected to long-term players in the market, such as Visa or MasterCard, anonymity is not 100% possible," states Anni Rautio, Product Manager at Xapo and the Head of Xapo Debit Card.
Indeed, most of the service providers in USA and Europe will require a whole set of documents, among which are an ID card, social security number, driver license, and some other documents.
SpectroCoin, however, offers a middle-ground approach: the company allows cardholders to stay incognito under $2500 funds turnover. It's worth noting that limit is enough for a number of users to stay anonymous for entire card lifetime. And if card owner needs higher financial limit, ID card and utility bills will be everything that required of him to get verified access.
It is noteworthy that not all market players see the problem in the prevailing situation:
"Lack of privacy is not necessarily a problem, as non-anonymous cards enable stronger fraud controls and consumer protection. I'd say the balance between anonymity or privacy to certain extent and convenience is providing personal information. Some people prefer convenience over anonymity, others prefer anonymity over convenience", says Anni Rautio, Head of Xapo Debit Card.
Associated expensesAnother disadvantage of Bitcoin debit cards are prices and additional fees. In average, users have to pay $15 for a physical card and about $3 for its virtual analog and then, in some cases, add around $60 for express delivery. Spending doesn't stop there, though: there are also fees for domestic ($2,50) and international ($3,50) ATM withdrawal. At the same time, international transactions fee is something around 3%. Card service is one more item of expenditure: it includes monthly/annual service ($1 and $12 respectively), PIN change (~$1), card replacement (~ $12), etc.
It's not a secret that nobody likes to overpay, and given how small this market is, pricing policy can play a significant role for the competitiveness of the service. Realizing this, many companies seek to meet some kind of balance and offer the most democratic solution. SpectroCoin is no exception to this. The prices of both virtual and physical cards are significantly lower than the market average ($0,5/$9 against $3/$15). As for loading fee, SpectroCoin doesn't take any, it also offers lower exchange rate.
InconveniencyBesides the major issues, there are also other, interrelated problems. Mainly, they are relevant to Bitcoin itself. One of them is that even after 7 years of its existence, Bitcoin doesn't still receive a wider adoption.
Anni Rautio, Head of Xapo Debit Card:
"Large scale adoption of Bitcoin is still far away, and very few merchants (and practically no banks) accept Bitcoins yet. Bitcoin and the Bitcoin debit card markets are still not at all mature, so the industry as a whole has a long path to go."
Speaking of the problems of Bitcoin debit cards themselves, Vytautas Karalevicius, co-founder and CEO of Spectro Finance, shared his own vision:
"The major problem is inconvenience. People now have to load their card before using it to purchase or withdraw money at ATM."
However, according to his words, SpectroCoin is about to present a solution to this problem. Beginning in October, users will be able to directly link their debit cards to Bitcoin wallets. It doesn't matter how exactly the card is used - online or at ATM - Bitcoins will be automatically changed to required amount of funds to complete the operation. This literally means that users will be able to keep their funds in Bitcoins as long as possible.
Growing interestWhat awaits the industry in near future? Practitioners predict the growing interest, and as a result, the establishment of a large number of new market players.
Anni Rautio notes:
"Most of our growth for the Debit Card today originates from emerging markets, such as Brazil, South Africa and Malaysia among others. It is clear that countries with high inflation and possibly unstable economic environments are turning to alternative payment methods."
For Vytautas Karalevicius, this tendency is reflected in "increase of small amateur projects willing to hit the jackpot in a short term by charging high premiums for card issuance and high loading and exchange fees." However, in his understanding, such projects most likely won't be able to survive the competition:
"I believe that in the long term, the need for Bitcoin debit cards will reduce drastically as people will be able to use Bitcoins at many more locations. Hence, in the long term full-functioning wallets with more features than just a debit card will sustain as the wallet, exchange functionality is more important for actual Bitcoin users. I think that companies focusing on development of the Bitcoin usability for its clients will become the leading ones in the long term by eliminating only one service companies", says Vytautas Karalevicius, co-founder & CEO Spectro Finance
Karalevicius has also shared the company's future plans. Futhermore, SpectroCoin just finished its DASH integration, which allows not only full DASH wallet and debit card capability, but also the opportunity to get a return from participating in our masternodes. As for the further plans, the company is going to follow its initial conception and provide support for the whole spectrum of cryptocurrencies; "afterwards we are planing to add a full support for more altcoins," states Vytautas Karalevicius.