How to Build a Crypto Card Business?

Building a crypto card business requires a sophisticated technology stack that connects decentralized ledgers with centralized banking. 

This article explains to you the steps to build a crypto card business, key components of the infrastructure, and the revenue streams in a crypto card business. Let’s look into them in detail.

How to Build a Crypto Card Business?

Starting a crypto card business requires in-depth knowledge of the crypto industry and related regulatory compliance. 

Step 1: Crypto Card Business Planning 

Creating a business plan before starting a crypto card business is vital. It lays the roadmap for building your cryptocurrency card business. 

Make sure to cover the business objective, target market details, business partner details, and marketing strategies. 

Step 2: Partner with a Crypto Card Issuer

Choosing the right crypto card issuer that provides the necessary infrastructure is essential. 

Select them based on their expertise, reputation, and customization options, helping you to meet your business requirements and also to scale up your business in the future. 

Step 3: Implement Security Measures 

Implementing strong security protocols to protect user data and digital assets is a must. 

Security measures like multi-factor authentication, data encryption, and multi-signature wallets help in protecting the digital assets from fraud and cyber attacks. 

Step 4: Crypto Card Integration 

Integrating the crypto card into platforms like crypto exchanges, web3 wallets, crypto payment gateways or other financial apps helps to facilitate seamless transactions for users using crypto cards.

Select the platform based on your target audience and connect the card system with the users’ accounts using the API. 

Step 5: Testing & Launch

Once the card system is connected with other systems, test its accuracy and performance. Allow crypto enthusiasts to use these crypto cards and get their feedback. If any bugs are found, rectify them before the public launch. 

Once the crypto card system is tested, the crypto card should be marketed in the crypto forums, social media, and other platforms. 

The crypto card should be launched and made open for public use. 

Crypto Card System Infrastructure 

The crypto card system’s infrastructure should be able to bridge the gap between the decentralized ledger and the centralized banking system. So, designing accordingly is essential. 

Wallet Infrastructure 

The wallet infrastructure of the crypto card system should be able to handle a multi-asset ledger that tracks user balances between hot and cold wallets. 

Conversion & Settlement Engine

The crypto card system should bear a powerful conversion and settlement engine. This infrastructure is responsible for the instant conversion of cryptocurrency to fiat and for settling funds in the merchant’s account. 

Card Issuance & Lifecycle Management 

This infrastructure in the crypto card system should be able to handle virtual and physical card creation efficiently. It should also manage card features like setting spending limits, restricting certain merchant types, and handling security protocols. 

Funds, Liquidity & Record Verification 

The infrastructure should be built in such a way as to manage funds and crypto-to-fiat conversion through liquidity providers efficiently. 

Verifying payment settlements and user funds deductions should be verified daily.

White Label vs Direct Issuer Approach

Choosing the right model based on your capital, regulatory burden, and launch timeline is essential. 

The core operating models to build a crypto card business include the white-label orchestration model and direct issuer and processor partnership model. Let’s look into them in depth.

White-Label Orchestration Model

One of the most preferred models to build a crypto card system is through a white-label orchestration model. Generally, businesses prefer this type because it allows a faster launch at a lower cost. 

In this model, businesses should partner with a vendor that provides a card-as-a-service solution. 

The orchestrator will handle each and every component, such as the bank partnership, KYC/AML compliance, transaction processing, and fund settlement. 

So, the primary responsibility of the business looking to launch a crypto card is to conduct marketing campaigns and manage customer relationships for a better reach.

Direct Issuer & Processor Partnership Model 

This type of model is preferred by the business who have high expertise in this field. 

It is like building a crypto card system from scratch, where the business owner needs to partner with the card issuing bank and a payment processor themselves. 

The business owner will be responsible for managing the flow of funds, compliance, and other responsibilities. 

This model gives you high customization rights, but the operational cost is high.

Why Launch a Crypto Card Business?

Crypto cards remain the most convenient way for users to spend their digital assets on daily purchases. It also increases transaction volume significantly. Here are 3 reasons why you should launch a crypto card business.  

• It helps you meet the growing demand among crypto users.
• This business can pave the way for multiple revenue streams, such as transaction fees, annual fees, and interchange fees. 
• It can help you position your business one step ahead in this competitive crypto industry.  

Key Considerations Before Launching a Crypto Card

There are three main factors that should be considered before launching a crypto card.

• Adhering to regulatory compliance in the crypto business is a must.  Adhering to regulatory compliance in the crypto business is a must. To prevent fraudulent activities, a crypto card business should comply with KYC/AML requirements and obtain a license specific to its region. For insights into the legal frameworks and authorization procedures for crypto exchanges worldwide, explore our detailed guide.
• Performing market research and analysing target customers before launching a crypto card business helps to tailor the business model according to the preferences. 
• Partnering with the right card issuer, payment processor, and technology provider paves the way to the success of the crypto card business. 

Revenue Streams in Crypto Card Business 

Both crypto cards and traditional cards, like credit and debit cards, operate similarly, but the unique backend operations of the crypto card have opened doors to unique revenue streams for businesses. 

Let's look into them one by one.

Interchange Fees

These fees are generated from the merchant’s bank account when a user performs a fund transaction using a crypto card. 

Conversion Spread

It is charged when cryptocurrency is converted into fiat currency. This fee is usually the difference between the market fee and the conversion fees. 

Card Issuance Fees

They are charged when a new card is issued to a user in the name of card issuance fees. 

Premium Tier Fees

They are charged as monthly subscription fees when users want access to higher-level plans with extra benefits. 

Ecosystem Uplift Fees

Crypto card businesses generate indirect revenue from increased user activity. 

On/Off Ramp Fees

These fees are generated when users move funds between the wallet and exchanges, where a certain percentage of fees is charged as on-ramp and off-ramp fees. 

Cost Drivers of a Crypto Card Business 

The main expenses involved in running the crypto card business include the following. 

• Fees paid to the card issuer and the payment processor for creating cards and handling transactions are charged on a monthly basis or per transaction. 
• One of the primary expenses in running a crypto card business includes verifying the customer's identity, preventing fraud, and monitoring transactions. 
• Providing customer support, such as solving queries, disputes, or refund-related queries, is also a cost driver in running a crypto card business.
• Converting crypto into fiat, including trading fees or slippage during asset sales, is also one of the main expenses in running a crypto card business. 

Final Thoughts

Cryptocurrency users are interested in spending crypto for their daily purchases, such as food items, dresses, books, or even paying subscription fees. 

Crypto businesses have understood this approach and have started building crypto platforms, and one such platform is crypto cards. The simple truth is that businesses are transforming a passive user  base into an active one, therefore creating a revenue-generating system. 

Building a crypto card business helps them to keep one step ahead in the crypto industry and also increases their revenue generation streams. 

Businesses with more capital and expertise in this field can opt for a direct issuer and processor partnership model. On the other hand, businesses with minimal capital can opt for a white-label orchestration model. 

So, choosing the right crypto card business model depends on the expertise and capital amount.