Crypto card issuers absorb losses to fund rewards-led customer growth

Traders Union
All News
Crypto
Crypto card issuers absorb losses

Highlights

KAST shifted from near break-even to losses by subsidizing 8%-12% Reserve account rewards with only 3.5%-4% underlying returns, supported by an $80 million March fundraising.
Bleap and KAST both expect long-term profitability through cross-selling services like trading and business products, despite current unprofitable reward-led card usage.
Bleap and Bybit EU reduced rewards—Bleap cut cashback to a 1% base while Bybit pivoted to an uncapped 1%—as EU interchange fees (capped at 0.2%) strain reward economics.

Rewards strategies strain near-term economics

As reported by CoinDesk, several crypto card companies are accepting weaker short-term economics as they compete for market share through aggressive rewards and account benefits.

KAST, a stablecoin-based financial platform issuing cards on the Visa network, says it moved from near break-even into losses as it increased spending on growth. Chief executive Raagulan Pathy said the company offers 8% to 12% on its Reserve account depending on membership tier, while the underlying assets generate only 3.5% to 4%, forcing KAST to cover the gap itself.

Pathy said Reserve had attracted tens of millions of dollars by September and that the subsidy burden was significant. He described the spending as a deliberate push to win market share, supported by the company's $80 million fundraising in March led by QED Investors and Left Lane Capital, and said KAST had four to five years of runway without investor pressure to rush to profitability.

Bleap is making a similar calculation. Its Latvia chief executive, Eduards Timofejevs, said customers who only use the company's Mastercard for spending and cashback can be unprofitable, even as the platform promotes returns of up to 15% on crypto holdings and cashback of up to 20% on purchases. He said scale and added services such as trading are expected to improve margins over time.

The central bet for both companies is that card users will eventually buy other services. KAST points to membership fees, business services and planned products such as tokenized stocks, while Bleap is trying to cover more of users' financial needs inside its platform.

Retention risks and broader payments impact

That strategy becomes harder to sustain if customers reduce usage once rewards are trimmed. Bybit EU has already reworked its prepay Mastercard terms, replacing non-VIP cashback tiers of 2% to 10%, subject to monthly caps, with an uncapped 1% from June, with the change applying to existing cardholders from Aug. 4.

Bleap has also altered its structure, shifting from an earlier 2% cashback model to a 1% base rate with higher rewards in selected categories. The economics behind those revisions are shaped in part by interchange limits, with European Union rules capping issuer fees at 0.2% for covered consumer debit transactions, far below the headline reward rates many providers advertise.

Some firms argue the card still makes sense when viewed as part of a wider customer relationship. Kraken's money app Krak told CoinDesk in August that users averaged about 8.3 card payments a week, with retail and store purchases accounting for 59.3% of transactions, while the company was nearing 200,000 cardholders and wanted to become users' primary financial account.

OKX is pursuing a similar ecosystem approach in Europe, linking debit card use to account activity and VIP benefits. Newer entrants are also testing different structures, including Cero Finance's model built around yield, transaction income, credit and lending, and Ether.fi's Cash card, which ties borrowing to staked assets and managed decentralized finance vaults.

Those approaches point to a broader shift in crypto payments, where cards are increasingly treated as an entry point to lending, staking and trading rather than a standalone product. Until those cross-selling efforts consistently offset reward costs, however, issuers remain exposed to the risk that generous incentives attract users faster than they create durable profit.

In our earlier coverage of rising executive incentive payouts at South Africa’s JSE Top 200 companies, we noted that variable compensation for CEOs and CFOs has been climbing much faster than fixed pay. The article also highlighted growing governance pressure, including new Companies Act rules requiring pay-ratio disclosure and introducing binding shareholder votes on remuneration that can restrict directors’ roles on pay committees.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.