CardsFTW #28: Crypto Card Competition Continues
Plus, Mission Lane Adds Debit Services, Square to Add Business Banking
BlockFi Enhances its Upcoming Card
In December of last year, BlockFi announced its upcoming Visa credit card product (see CardsFTW #11). Powered by Deserve and issued by Evolve Bank & Trust, the BlockFi Visa was the first in a line of crypto-enabled card announcements. In January, crypto provider Gemini announced their card (see CardsFTW #15). Earlier this month, SoFi announced its existing card would gain the ability to redeem cashback directly to crypto (see CardsFTW #26). Plus, neobank Unifi Money has announced an upcoming credit card with crypto capabilities.
In the face of the competition, BlockFi announced several changes to their upcoming card program on Tuesday. Key changes include:
No annual fee (previously $200 per year)
No foreign transaction fee
Introductory rewards rate (3.5% for the first 90 days, capped at $2,857.15 in spend)
In February, BlockFi had announced some updates to the rewards card structure, not all of which seem to be in play. (The blog post is missing but is available in the Wayback machine here.)
There are additional bonuses and changes in the announcement, including a high-spend tier of 2% cashback for annual spend greater than $50,000, bonuses for cardholders on their trading and interest accounts, and a refer-a-friend program.
Like many branded cards, if you are a big BlockFi user, this card could be a solid addition to your wallet. If you’re looking to leverage cash back to invest in crypto, the card makes it easy with automatic redemption, but you could turn any card’s cashback to crypto through your own process.
One final note of interest is that BlockFi announced a soft pull credit inquiry for users. The updated application process allows consumers to understand if they will be approved without creating a hard inquiry on their credit report. (The hard inquiry occurs only after account creation.) Soft pulls are becoming more and more frequent these days and seem to bend the credit bureau rules a bit, but maybe one of you will teach me more about why this is allowed in the comments.
With no annual fee and a 3.5% first 90-day spend bonus of $100 in value, the card should be attractive to sign up for, especially with no hard credit pull if not approved. Given the number of new entrants in the past six months, I commend BlockFi on an aggressive set of changes that will help them launch on a solid footing.
The competition will be intense, both for crypto-focused cards and all cards. A recent Reuters report quoted industry analysts at Mintel Compremedia, noting that issuers mailed more than 260 million credit card offers in March. As I’ve mentioned in several of the past issues of this newsletter, banks are eager to regain lost revenue from the pandemic and need consumers to spend and borrow.
It isn’t just pandemic-related behavior changes that are impacting issuers. Our other theme for the past year of buy-now-pay-later spending is affecting cards as well. A Financial Brand analysis notes revenue increases in excess of 200% at BNPL providers. Consumers are explicitly trading credit cards for BNPL, with Financial Brand reporting 47% of consumers said a reason for using BNPL was to avoid credit card interest charges.
As credit card providers roll out BNPL and fixed repayment plans for specific charges on their cards (see CardsFTW #17) and BNPL providers roll out cards (enabling customers to use BNPL at non-partner merchants), these products will look more and more alike. Either way, providers will be lending more dollars, users (or some merchants) will be paying finance charges, and the lenders will make money.
Mission Lane Adds Debit
Mission Lane, a late-stage fintech that offers credit to mainstream Americans (and has been called Capital One 2.0), announced its acquisition of couples finance startup HoneyDue. Direct from the press release, the plans are to “leverage Honeydue’s strong digital banking capabilities to bring additional innovative and transparent financial products, such as debit cards, to consumers.” Everyone wants to be a full-service financial provider, and you need credit and debit card products to do so.
Shared finances (or “multiplayer fintech”) is a burgeoning topic. We’ve now seen several exits of earlier entrants. Strategic Financial Solutions, a debt relief provider, acquired HoneyFi in March.
HoneyFi and HoneyDue both focus specifically on supporting money-sharing needs for couples. HoneyFi operates an app-only approach, while HoneyDue incorporates a debit card product. Other entrants in the space have a broader definition of shared finance, such as roommates and more, including players like AskZeta and Braid, which offer shared cards and accounts. (As do other neobanks where the focus is more general).
While much of the discussion about neobanks starts with debit and expands to credit, Mission Lane is a rare company going the opposite direction. Many consumers are in a coupled arrangement (married or otherwise) and shared finance and credit are essential capabilities that will become core requirements soon.
More Business Payment Cards
Square started on the merchant acquiring side of payments, helping small businesses to take credit and debit cards more easily. It’s hard to remember that most small merchants couldn’t (or wouldn’t) accept credit or debit cards just ten years ago. Square is an easy and ubiquitous solution that enables millions of everyday payment interactions because it is just so easy to take cards.
Over time, Square added consumer options as a debit card issuer, connecting the two sides of the business. Square Cash is one of the most successful neobank products out there.
According to a recent Bloomberg report, Square planning to offer more services around business checking and savings accounts. Adding these services is not surprise and makes logical sense following Square’s bank charter starting recently. Square has a large installed base of customers and has long focused on products that enhance life for small business owners, like invoicing and payroll. Moving to direct money management is a natural progression.
Next, we may see Square roll out both consumer and business credit card products. It will be about the only thing they are missing! If they can have the same sort of acquisition success they see on the merchant side, we would see records broken on efficiency.
While I’ve heard people ask if there is room for Brex, Divvy, Ramp, and others, I think the answer is a resounding yes. The team at FinTechToday did a nice write-up on the corporate space last week if you want to dig a bit more into Ramp and others. With more than one trillion dollars in commercial card volume up for grabs, these unicorn-status fintech players are just scratching the surface.
As fintech infrastructure capabilities grow, it will be easier than ever for companies to extend their product lines from a single offering to multiple. Credit and lending are typically the most complex, based on the risk patterns, but we know that credit-cards-as-a-service platforms are launching, enabling more companies to roll out these services.
Thanks for reading CardsFTW, a weekly-ish newsletter about all things debit and credit. CardsFTW is written and curated by Matthew Goldman, Founder, and CEO at Vertical Finance, a challenger credit card startup. If you’re looking for insights into everyday payments beyond deal blogs, please subscribe for free at cardsftw.substack.com. If you enjoyed this, please share it with a friend! Follow me on Twitter @magoldman.