Original author: Pzai, Foresight News
With the booming crypto asset market, we are facing an era of big payment cards. It seems that every protocol is eager to have its own crypto card business, and wants to maximize every retention of users in the protocol. Behind the dazzling choices are countless payment providers who build bridges between crypto and traditional payment methods. In terms of asset types and income choices, the unique asset environment on the chain also provides enough support for the growth of payment cards. Why are there so many payment cards in this cycle? This article will take you to analyze from multiple angles.
Brief analysis of operation mode
Crypto payment cards are essentially a bridge between the cryptocurrency ecosystem and the traditional payment network. The entire system involves multiple participants, including users, card issuers, custodians, payment channels, merchants, and card organizations. Users first apply for a crypto payment card from the card issuer, and the card issuer connects with card organizations such as Visa and Mastercard through a card issuing intermediary to complete the card issuance. At the same time, the custodian is responsible for managing the users cryptocurrency assets and may invest part of the funds in other parts to obtain returns, forming a complete closed loop of fund management.
When users use crypto payment cards to make purchases, the system automatically performs a real-time conversion of cryptocurrencies to fiat currencies. The specific process is as follows: users swipe their cards at merchants, payment requests are processed through payment channels, the system deducts the equivalent amount of cryptocurrencies from the users escrow account and converts it into fiat currency, and finally completes the payment to the merchant. The entire process is no different from traditional bank card payments for merchants, while users achieve the goal of directly using digital assets for daily consumption.
Current crypto payment card products have been widely integrated with mainstream payment methods, including Google Pay, Apple Pay and Alipay, which greatly improves the convenience of use. The main products on the market include Crypto.com Visa Card, Binance Card, Bybit Card, Bitget Card, etc. These products are usually launched by large cryptocurrency exchanges. On the technical level, some card issuers have also integrated DeFi protocols such as Ethena, Morpho, and USUAL to provide users with asset value-added services and build a complete financial service ecosystem from payment to wealth management.
Image source: X: Yue Xiaoyu
Growth tool: Demand side is in full swing
According to The Brainy Insights report, the global crypto credit card market is worth $25 billion in 2023, and the crypto payment card market is expected to exceed $400 billion by 2033. The essence of all major protocols rushing into the payment card business is a growth battle. Although the profit share of payment cards themselves is relatively limited for protocols, the payment card business has extremely high strategic value in user acquisition, ecosystem construction, and capital accumulation. Therefore, exchanges, asset management companies, and Web3 project parties are still willing to invest because it can bring more extensive user and business growth, and even further ecological expansion.
For the crypto field, the underlying demand for payment has spawned many PayFi products, but Bitget Wallets survey shows that although cryptocurrency payments have unique advantages in speed (46% of users choose), cross-border costs (37% value low fees) and financial autonomy (32% pursue decentralization), their actual application scale is still significantly different from traditional payment systems. The current traditional payment market size is as high as trillions of dollars, covering the vast majority of daily transactions around the world, while crypto payments only account for a very small share, mainly concentrated in cross-border remittances, digital asset transactions and other sub-scenarios.
The core reasons why users prefer traditional payment methods can be summarized as follows:
Trust and security: Crypto users are concerned about the security risks of crypto payments (such as hacker attacks and fraud), while traditional payments rely on a mature banking system, legal protection, and dispute resolution mechanisms, significantly reducing transaction risks.
Stability and convenience: Price fluctuations make it difficult for crypto payments to serve as a stable medium of exchange, while the stability of traditional fiat currencies is more suitable for daily consumption. In addition, users believe that insufficient merchant acceptance limits the practicality of crypto payments, while traditional payments achieve seamless coverage through a wide range of POS terminals and online integration.
User experience inertia: Traditional payment tools have low operating thresholds and users have formed long-term usage habits, while the complexity and technical barriers of encrypted wallets have become obstacles to popularization.
Therefore, as a bridge connecting crypto assets and the traditional payment ecosystem, the core utility potential of payment cards lies in using the existing merchant settlement network to instantly convert crypto assets into legal currency to complete transactions, thereby achieving the utility extension of on-chain assets + real-world payment scenarios, while reducing cross-border channel costs and price volatility risks.
Regulatory “arbitrage”: avoiding off-chain risks and reducing costs
From a regional perspective, payment settlement providers are more concentrated in Europe because they need to take into account the dual compliance characteristics of cryptocurrencies and legal currencies. According to Adan.eus research, European countries have an average cryptocurrency adoption rate of more than 10%, especially among young people and areas with active financial technology. Consumers preference for flexible payment methods, coupled with the expansion of the stablecoin ecosystem, has made crypto payment cards an important bridge connecting traditional finance and the Web3 world.
In addition, since the US dollar and the euro have strong cross-regional liquidity, and payment cards often involve stablecoin payments, using crypto payment cards in certain countries that need to avoid bank systemic risks can help people achieve more flexible financial services. At the tax level, the process of payment cards directly converting crypto assets into cash through channels avoids tax collection in some transactions to a certain extent, which has also become an opportunity for some users to use crypto cards.
In the case of imperfect regulation on the settlement side and on the chain, the existence of gray areas has become a hot topic for many payment providers, and has led to potential money laundering and regulatory evasion. However, in terms of compliance, Europe and the United States are promoting and implementing relevant laws in the crypto market as quickly as possible (for example, the EU MiCA requires relevant business companies to apply for compliance licenses in EU member states to continue to provide services, and to restrict the scope of services), and this model will no longer continue.
Business model: Open up the asset entry on and off the chain
On the settlement side, crypto payment cards present diversified operating forms, among which the most common form is the credit card/prepaid card with stable currency-consumption limit. The debit card model involves more complex fund management and risk control mechanisms, so only a few payment cards can achieve it. When users have a demand for use, they need to recharge the stable currency into their account first. After the consumption limit in the card increases accordingly, users can use this limit to make various consumption. In this chain of capital circulation, the conversion of cryptocurrency and legal currency is involved. The card issuer obtains income through exchange rate differences, handling fees, etc. In the process of cryptocurrency-legal currency conversion, the card issuer can generally charge a handling fee of 0.5%-1%. Therefore, the recharge fee generated during the user recharge process has also become one of the important sources of income for the payment card business.
On the chain, some payment cards use a method of integration with DeFi protocols to introduce idle funds in user cards into the income generation mechanism. For example, through integration with DeFi protocols such as Morpho, Infini can automatically deploy the users unspent stablecoin balance to the income agreement, allowing users to obtain on-chain income during the consumption process. In this model, the card issuer can not only obtain transaction profits from traditional payment channels, but also share part of the income from DeFi interest, forming a dual profit model. At the same time, on the basis of enjoying payment convenience, users obtain asset value-added services that traditional bank cards cannot provide.
Therefore, from the perspective of revenue, the model of crypto payment cards mainly consists of two parts:
On-chain tax: interest income from reserve assets/product income
Stablecoin issuers earn interest by holding reserve assets such as U.S. Treasuries. In the first quarter of 2025, Coinbases stablecoin-related revenue was approximately $197 million, with an annualized interest rate of typically 2% to 5%. For users, before the advent of on-chain payment cards, there was no way to access such income opportunities when using payment tools. The integration of on-chain protocols eliminates this gap and provides a new idea for crypto issuers, that is, to innovate capital sinking channels through payment cards, reduce the cost of introducing funds, and transform into alternative asset management. After a certain scale of TVL is generated in the future, crypto issuers can innovate asset types and investment paradigms to create more added value for users.
Off-chain taxes: Fee sharing between payment card operators and issuers
When users use USDC to pay through payment card networks (such as Visa), Visa usually charges an interchange fee of 1.5% to 3% of the transaction amount, which is generally borne by the user. At the same time, the card issuer may also charge an additional 2% foreign currency transaction fee or ATM withdrawal fee. In these processes, most of the fees are attributed to the settlement link, and the card issuer mainly bears the part of the conversion process between cryptocurrency and legal currency.
The future of payment cards: from payment tools to ecosystem entrances
With the rapid development of blockchain technology and cryptocurrency, crypto payment cards are no longer just a simple payment tool, but have gradually evolved into an important traffic entrance for the crypto ecosystem. In the wave of the on-chain liquidity war, payment cards are not only a consumption channel, but also a strategic bridgehead for promoting the large-scale adoption of blockchain technology. Crypto payment cards allow on-chain assets to directly enter real consumption, shortening the path for users to enter Web3, for example:
Users in the traditional financial world need to go through a complicated process to transfer funds into the crypto market, but crypto payment cards allow them to use crypto assets more easily and achieve rapid off-chain connectivity.
Exchanges and DeFi platforms are promoting the popularization of encrypted payment cards. While increasing channel traffic, they can also organically integrate with business operations, innovate and extend protocol functions to create profit points. For example, payment card users may receive platform points or token rewards every time they consume. These rewards can be further used for on-chain investment, DeFi mining or other ecological services, thus forming a positive feedback loop between users and platforms.
New users can first use encrypted payment cards to make purchases, and then gradually enter the on-chain ecosystem. This consumption-driven user guidance method is expected to become the mainstream traffic entry strategy for Web3.
Looking ahead, the competition for crypto payment cards will further shift from a single payment tool to an ecological and integrated financial platform. Project parties need to break the short-lived curse of crypto payment cards through technological innovation, compliance construction and user experience optimization. In the future, crypto payment cards will not only be consumption tools, but also a comprehensive financial platform integrating payment, investment, credit assessment and ecological incentives. Through deep integration with Web3 elements such as DeFi, NFT and on-chain governance, payment cards will become the core entrance for users to enter the decentralized world.
