Background
This is a dual payment card proposal originally proposed to 3EX cryptocurrency trading platform for building the PayFi environment. It included not only the UI/UX aspect but also the underlying framework, such as the revenue model, credit line model, repayment mechanism, payment gateway, and digital wallet research. The proposal was developed at a very fast pace, in just 2 weeks. (However, it did not proceed as 3EX is permanently closing after I worked there for 2 weeks.)
Target user
APAC Crypto user who want to spend their digital assets in daily life.
My Role
1. Product research
2. Drafting product direction, mechanism and framework
3. Wireframe
Understand the Card Market
While glancing at the crypto payment card market, the majority are USDT debit and prepaid cards, which rely on users topping up, while there is a tiny portion of credit cards, each type coming with its own benefits, business, and UX concerns.
Prepaid Card
Since prepaid cards are not linked to any account, they require users to top up the card by transferring funds from a separate account or wallet. From a UX perspective, this might not be a good product as it involves high interaction and time costs. Additionally, since USD-based stablecoins like USDT and USDC are predominant, if the card currency does not match, it requires extra effort in reviewing the exchange rate.
My first experience with a crypto-supported card was the Crypto.com prepaid card, which required me to transfer assets to the card wallet, then convert USDC to fiat SGD, and finally top up SGD to the spending wallet for spending. This was quite annoying because I had to go through several steps and continuously check the exchange rate.
Debit Card
This is more advanced compared to prepaid cards. As they are linked to a user's account, they deduct funds directly while spending, making the process much simpler and smoother. However, from both the customer's and business's viewpoint, they do not fully utilize the value of digital assets since they are purely for spending (there might be a slight benefit for users if saving interest or staking yield is supported).
Credit Card
Crypto credit cards are rare (only NEXO card and EtherFi Cash exist). When a credit line is included, the product becomes more interesting, dynamic, and potentially beneficial for both customers and businesses. Since the credit line functions as a form of borrowing, it generates revenue for businesses from credit interest. From the customer's perspective, it provides additional funding without the need to sell their digital assets, allowing them to still benefit from rising prices and staking interest.
Summary
As for the goal to provide extra revenue to the platform, we were moving towards the dual card direction. Given the advantage of our exchange platform background, users' wallets, such as spot or funding wallets, could be linked directly to the card for debit payments, leading to a seamless payment experience. Meanwhile, the credit side serves as an additional feature, enhancing the diversity of financial functionalities.
In general, I propose a dual card that includes both debit and credit payment options, which could support basic crypto spending functions while also creating a revenue model through lending business. The card's currency would be better suited as USD to match predominant stablecoins like USDT and USDC.
Debit
Debit mode simply show up the available assets for spending.
Credit
Credit mode shows far more attributes than debit mode, demonstrating the relationship between credit line and loans. LTV Health represent the risk of being liquidated.
Setting up the Mechanism
The dual card product will go into 3 parts, debit payment, and credit payment.
Debit Payment
Debit payment aims to let user to spend their digital assets directly, and release liquidity to the market for further usage, such as lending.
As 3EX is a trading platform, it is able to link up the card wallet and other trading wallets, providing a seamless flow for funding transfer. As for user deposit their crypto assets to the card, their assets will be separated into USD assets and collateral assets, which means USD stablecoins for the former and other crypto assets for the latter.
To increase the intention for deposit assets into the card, providing saving interest after minimum deposit is one of the incentive for the encouragement.
The card is planned to be backed by an exchange platform, allowing users to top up via their wallets, together with an earning function as an incentive for deposits/savings.
Users could choose to use their non-USD backed crypto assets or not, with the above showing how users can adjust the spending priority of tokens.
Credit Payment
Credit payment aims to let user to spend without selling out their assets, which user may keep the potential of appreciation and earning saving interest. Besides, the most important is that it brings a borrow-lend ecosystem into the platform as a revenue engine.
When talk about the credit line on crypto aspect, since there is no credit score, and complicate KYC process, the most intuitive way for judging the availability amount for borrow is by the collateral value, together with the LTV ratio for each type of assets.
Credit payment is disabled at the beginning unless the user consents to enable the function. The use of collateral in debit payment will be replaced by credit payment when an overdraft occurs.
All possible results of making a overdraft purchase under different scenarios based on the user's choice on debit payment, collateral debit payment and credit payment.
Repayment
Repayment is the most important part of a credit lifecycle as it is the gatekeeper of liquidity. In the existing crypto-based credit card market, the repayment mechanism is much more akin to a trading lending model, rather than the daily spending model that most users are familiar with.
Comparison between trading lending model & typical credit card borrowing model.
To align with daily spending, we adopt the repayment mechanism of traditional credit cards, which includes a grace period and a monthly due date.
The repayment model has referenced traditional bank credit cards, providing a grace period and a payment due date. However, there would be no minimum payment as it leads to contradictions when a margin call happens.
Flow of the circumstances leading to a margin call, how a user maintains their LTV ratio, and forced repayment.
On the other hand, since the credit line is based on user collateral rather than credit score and KYC, the LTV ratio becomes a significant metric to judge whether a user is risky or not. Changes in this metric may trigger margin calls and forced repayment with the purpose of lowering the risk to the platform. This behavior is rarely seen with traditional credit cards, but it's the norm for digital asset lending or margin trading.
What's Next
Wireframe and Scope
After setting up the mechanisms, rules, and scenarios, all of these have been visualized as follows: a landscape displaying the information of each page, layouts, feedback when users proceed with particular actions, controls, etc.
Involve Market Maker to Balance Between Lending and Borrowing
As the basic principle for the card product is to maintain a balance between lending and borrowing, the next step is to involve internal/external market makers to set a price (rate) for funds to maintain liquidity on both sides. This ensures there will be enough assets in the market for the borrowing side, and interest is paid on both sides. Once the market maker aspect is completed, the costs would be factored into the borrowing interest rate, which could then be used to cover the saving interest on the lending side, thus generating business revenue.
Card Payment Org. And Payment Gateway/ Digital Wallet
Once the internal card mechanism is completed, it's time to issue the card to the public. Besides contacting Visa/Mastercard, since the target audience is mainly APAC users, some critical payment gateways/digital wallets are considered the highest priority in developing the card's compatibility. (This may involve regulation concern.)
Unfortunately
3EX is permanently closing after I worked there for 2 weeks.
