Kim Kardashian's Lessons for the 'Bitcoin Card' Industry
Kim Kardashian may be an overexposed reality star, but she's also a tech entrepreneur with a short-lived past in the payments industry. And several companies in the Bitcoin space are repeating her biggest mistake by offering a plastic payment card.
Four years ago, Kardashian tried to diversify her product set by endorsing the Kardashian Kard, a luxury prepaid card that asked users to pay up to a year's worth of (otherwise standard) monthly fees upfront. The steep cost of entry was meant to keep customers using their prepaid card. During this time prepaid products were widely considered disposable.
The Kard failed, pretty miserably. Just 12 days after the product launched, it was pulled from the market amid criticism of its fees and lack of consumer protections. Plus many reacted harshly to the thought of Kardashian being a financial role model for teens and young adults. Only 16 were sold.
Several Bitcoin startups are following the same path Kardashian did years ago. They see a plastic card (either prepaid or debit) as a potential breakthrough that can make Bitcoin mainstream and ensure a long-term relationship with users. But the Bitcoin card, just like the Kardashian Kard, will suffer from a fatal lack of consumer demand.
Iterations of a Bitcoin plastic card have been whispered about for years. Former BitInstant CEO Charlie Shrem announced plans in late 2012 to launch a Bitcoin prepaid card supposedly in cahoots with MasterCard, although MasterCard denied knowing anything about the product.
Xapo, a Bitcoin startup headed by financial services entrepreneur Wences Casares, is probably the most well-known company working on a Bitcoin debit card. It launched the product earlier this year, and quickly had to pull cards out of U.S. consumer's hands because the company has no sponsor bank in the U.S.
Xapo has touted its card as a product that can take the friction out of transacting in Bitcoin for mainstream consumers, but these consumers will still face some friction when purchasing Bitcoin to load onto the card. Any consumer who prefers to use a debit card than a Bitcoin wallet would probably find it easier to use the bank account-linked debit cards they already have.
And for the Bitcoin enthusiast, why use a product that adds merchant interchange fees back into the equation, when the elimination or significant reduction of fees has been one of Bitcoin's main advantages?
Several other Bitcoin startups, including Coinjar, Coinkite and Shift Payments have developed Bitcoin cards and some are even being tested inside the U.S.
While Shift Payment customers seem happy with the product that's linked to their Coinbase account, the beta card disclosures are a bit odd. The Visa test card is being issued out of Japan. Customers are to specify the underlying currency as Japanese Yen when shopping on Amazon.com and to choose credit instead of debit when swiping the card at the point of sale.
The Kardashian Kard failed because not only because Kardashian and financial wherewithal don't gel, but mainly because it misjudged the market.
The reality star's more recent endeavor, the Kim Kardashian: Hollywood mobile game, has met the opposite fate. Its business model was similarly criticized a "free to play" game, goading players to spend substantial sums of real cash as they progress but rather than abruptly disappearing, the app is on track to earn Kardashian "more money than she's made from all her other ventures in the last year combined, from endorsements to fashions and fragrances," according to IGN.
These Bitcoin companies are also mistaking the market as one that needs traditional payment instruments to garner widespread adoption instead of cleaning up Web and mobile functionality which is Bitcoin's real means of disruption.