Coinbase Introduces the First Bitcoin Debit Card in the US; What Does This Mean for Large-Scale Adoption?

Coinbase, one of the largest bitcoin wallet providers from Silicon Valley, has launched a Visa-branded bitcoin debit card called Shift Card. Even though the Shift Card is not the first bitcoin debit card, it is the first one that works with Coinbase accounts in the US.

The card was launched in partnership with Shift Payments, which allows getting a Visa card for $10 and paying with bitcoin everywhere with no fees (for now). The fees for usage will be charged only if the card is at an ATM ($2.50) or for international payments (3%), as stated on the official website of the card. Also, the card is available only in 24 states. A Coinbase account has a daily ATM withdrawal limit of $200 according to the official website.

Shift Payments offers an integration of all currencies in one card with a debit card as a key product. The card can be connected to all accounts and allows making all payments. The company supports Coinbase and Dwolla accounts and allows shifting from one to another for backup in case one wallet is empty. The Shift Card will allow owners to use bitcoin as a payment currency at any merchant (online and offline) that accepts a regular VISA card.

Coinbase is one of the hottest Silicon Valley FinTech startups that offers digital bitcoin wallets for more than 2.8 million users globally. According to Coinbase, 20% of transactions in the company’s network are made with bitcoin; the remaining 80% are speculative, with bitcoin being traded for a profit.

Coinbase’s VP of Business Development and Strategy Adam White said to Wired, At the end of the day, what we’re trying to do is make bitcoin easy to use. We want to make it easy to buy and sell bitcoin, and we want to make it easy to spend. A mainstream debit card based on bitcoin is a key element.

What does Shift Card’s launch mean for large-scale adoption?

It is early to predict whether the card will be widely adopted or not. However, if it succeeds, it will become another potential competitor for payment card networks to worry about.

With all accounts backing each other in one card, the experience is being aggregated and smoothened for the card user. Seamless payments without any fees will become an extremely attractive offering that potentially can make a shift in usage frequency among market players and damage mono-account cards.

Bitcoin adoption is a two-way process. Currently, Merchants may not be actively adopting it because customers are not using it as much as regular currencies. Customers may be slow on adoption because not all merchants accept bitcoin payments. With financial attractiveness of bitcoin debit card for merchants, they will have an incentive to add the payment option and foster customer adoption.

Given that bitcoin payments are fee-free, they have a chance to become more appealing for merchants who will be more interested in promoting the new type of payment between their customer base and lead to a higher adoption rate. For traditional payment card networks, this will mean a potentially shrank market share, or in case they follow the trend and launch bitcoin debit cards with their brands, it may affect the revenue streams that are coming from speculations with traditional currencies’ exchange rates.

For merchants, bitcoin-based transactions are also attractive due to the excluded chargebacks. With merchants losing 2.3% of revenues due to chargeback on average, bitcoin debit cards can easily sway merchants away securing 100% of the sales revenue.

The statistics of bitcoin usage demonstrate the growing interest in the currency, especially with important market players incorporating the payment option and an impressive number of 6.6 million bitcoin wallets that had been set up by the end of 2014 and about $78 million worth of bitcoin transactions occurring every day. However, bitcoin still has room to grow. With a traditional instrument like debit card, bitcoin can be democratized and become another regular currency. In this case, the debit card democratizes bitcoin adoption as it works through a widely adopted familiar tool the traditional card customers have.

Currently, the Visa-branded Shift Card, in a situation of successful adoption rate, may attract the attention of MasterCard, AMEX and other market participants to consider similar offerings. On one hand, it is a great outcome for users; on the other, it means potential cannibalization of their own products – in particular, credit cards with a relatively higher transaction fees. Hence, banks will have to look into different ways to replace the loss of revenue stream coming from the fees. It may potentially increase the credit card fees or lead to a new set of fees introduced for the bitcoin-based transactions in the future.

There is a positive outcome for the market’s overall adoption pace. With bitcoin becoming a currency to use for payments through a traditional tool, market participants may become more eager and accept the next innovative solution when the time comes.