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OBSERVATIONS FROM THE FINTECH SNARK TANK
Cryptocurrency exchange Coinbase announced that it will launch a Visa debit card in the US in 2021. The card, which has been available in the UK and the European Union since April 2019, will be available in all states except Hawaii, and will offer rewards based on which cryptocurrency is used for purchases.
Coinbase will charge consumers a 2.49% liquidation fee unless the consumer opts to use USDC in which case there is no fee.
According to Benzinga:
“While this may be on the higher end compared to alternative cards, consumers are likely to appreciate the convenience of having immediate access to spend their cryptocurrencies on how and when they chose.”
Coinbase Users Are Already Spending Their Crypto
Coinbase claims 35 million users globally, but doesn’t report the number of users in the US. A recent study from Cornerstone Advisors estimates that a little more than 6 million Americans are using the crypto exchange.
Millennials, who comprise 35% of the total adult population in the US, make up 50% of Coinbase’s US user base. Coinbase users in the US are predominantly men (70% vs. 30% women), and earn, on average, $107,000 a year.
They haven’t been waiting around for Coinbase to come out with a debit card in order to spend their crypto, either.
The Cornerstone study estimates that Coinbase users in the US purchased roughly $16.8 billion worth of products and services over the past 12 months using Bitcoin—a little more than half of the $31.2 billion that all Americans spent.
And there’s no sign that they planned on slowing that rate of spending: Two-thirds of Coinbase users say they anticipate using Bitcoin to purchase products and service over the next year or two.
The Coming Coinbase/PayPal Crypto Payments War
Coinbase’s announcement comes on the heels of PayPal’s news that it will enable its users to purchase cryptocurrencies and use it for retail purchases with the company’s 22 million merchants.
With 80% of Coinbase users also being PayPal users, Coinbase is declaring a crypto payments war with PayPal by launching its debit card in the US.
Who will emerge as the winner?
It’s too early to tell. PayPal intends to charge a fee for acquiring cryptocurrencies, but no transaction fee. Coinbase will charge a transaction fee which will be offset somewhat by the rewards it plans to offer. In situations where users have a choice of payment mechanism, the onus of calculating the better option is on them.
The clear winner, however, is the cryptocurrencies themselves, which will get a huge boost in legitimacy with PayPal’s move.