Can bank-issued prepaid cards appeal to U.S. crypto market?

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There's still a large gap in the United States between owning cryptocurrency and using it to buy a cheeseburger at McDonald’s.

One London fintech claims it can close that gap by enabling consumers to use their crypto stash with a contactless, network-branded, bank-issued prepaid debit card.

Wirex is bringing its cryptocurrency-based prepaid debit card to the U.S. in an effort to capture the attention of what the company views as an enthusiastic crypto user base here.

Wirex has partnered with the longtime prepaid processor i2c Inc., which the company believes will help bring instant credibility to a product that has found some success overseas.

“We see there this is mass adoption of cryptocurrencies in the U.S, which has a very active community,” said Vroon Modgill, Wirex’s chief financial officer. “Given the size of the market and the opportunity, we’re quite optimistic and expect that to grow as our name gets out there.”

Wirex says it has 1.8 million users in 130 countries, with payment volume that hit some $2 billion in 2017.

The company also comes to the U.S. with regulatory backing in Europe. In August, it became just the third cryptocurrency-enabled company in the world to receive an e-money license from the U.K.’s Financial Conduct Authority.

Wirex is not the first company to offer a prepaid debit-card linked to cryptocurrency. The difference here is it offers consumers the ability to link various coins to the card so they can spend the converted fiat currency at any Visa-accepting merchant.

The company also has a traditional coin wallet that enables users to buy and store not only bitcoin, but also litecoin, ether and Ripple’s XRP. Wirex claims to be the first company to offer the ability to link those coins to a prepaid debit card.

Wirex also touts an industry-first crypto-based rewards program. Users receive 0.5% in bitcoin for each purchase. The bitcoin earned through the Cryptoback rewards program can be instantly redeemed, converted into fiat currency and spent.

Wirex plans to launch the card in the U.S. by the end of 2018. Potential users can join a waiting list available through the company’s website or mobile app.

Modgill said the card’s fees will be disclosed on Wirex’s site when the card is available. While he did not reveal details, the fees will more or less fall in line with what’s typical for a prepaid debit card.

The company declined to name the card’s bank issuer in the U.S.

As far as how Wirex and i2c will convince consumers about the need for such a card, the companies acknowledged they will need to educate both average consumers and crypto enthusiasts about its benefits.

At the very least, the average consumer now is more aware of cryptocurrencies than ever before. A recent YouGov survey found 79% of Americans are aware of at least one cryptocurrency. Bitcoin leads the field by a wide margin at 71% while ether lags far behind at 13%.

Such awareness presents an opportunity for Wirex to gain some users outside traditional crypto fans.

“There’s a level of familiarity,” said Joe DeRosa, i2c’s executive vice president of global sales and marketing. “Part of this [partnership with Wirex] is about building familiarity. And then part of this is building the ability to [transact] in this way, and then comes the adoption.”

Whether the two companies can persuade seasoned crypto users to buy into the prepaid card is another question. Part of crypto’s appeal with hardcore users is its pseudoanonymity and the elimination of third parties like a bank or processor to handle transactions.

Most crypto users thumb their nose at any arrangement involving a middleman. However, Modgill said Wirex is “solving for the here and now” as it relates to cryptocurrency acceptance in the U.S.

Bitcoin merchant acceptance has been sporadic at best in the U.S. the past several years.

Some major merchants such as, Expedia and the Dish Network rushed to accept bitcoin in late 2013 and 2014 with hopes of cashing in on a hot trend.

Bitcoin acceptance at brick-and-mortar retailers mostly faltered despite efforts from processors such as Bitpay.

Wirex and i2c frame the prepaid debit card as way to “bridge the gap between cryptocurrency and fiat currency” for purchases at the traditional point of sale.

“I think today, it’s less about a middleman involved, and more about, I have this new currency in my wallet and how do I actually do something with it and spend it,” DeRosa said.

“When you get together two organizations with proven track records, it does more than bring credibility to a solution,” DeRosa said. “It’s a partnership of what I would call experts in both of our fields.”

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Cryptocurrencies Bitcoin Debit cards Prepaid cards International business Visa Ethereum