A debit card for crypto seems simple in theory. You just need to find a bank to convert crypto into fiat (real-world money). The thing is, it’s actually quite difficult. One crypto startup, Unbanked, managed to succeed, and as a result, now generates eight figures in ARR.
For founder Ian Kane, Unbanked started as a plan to use the blockchain to create more value for online advertisers. He saw that when companies made ads for the internet, the ads would go through dozens of intermediary businesses before they were placed as banners on websites. Each intermediary would leech some of the value off the transaction. By the time the ads reached the websites that would place them, only a fraction of the ad spend was left. That meant worse ad placements.
To prevent this massive loss of ad dollars to intermediaries, Ian devised a system to send the ad value over the blockchain. Websites displaying ads could then redeem the full cash value of the transaction through crypto and spend it as cash with special voucher cards powered by Visa.
While advertisers weren’t willing to buy in, Ian had other businesses clamoring for one of his crypto debit cards because he had done something most thought impossible: He’d created an SEC and Visa-approved crypto transaction account. To do it, he pitched small local banks nationwide to let him use their accounts to transact crypto. Once the banks were on board, Visa eventually asked Unbanked to create cards for their partners too.
Now Unbanked is both a crypto bank and a white label crypto Visa card service for entities like Litecoin and more. It grew to millions in four years of Bootstrapping and is now at the frontlines of modern crypto banking. It’s even created its own cryptocurrency and a line of NFTs.
Trying to Fix Advertising Transactions on the Blockchain
Ian Kane had been working in advertising for years when he began to research blockchain technology. He thought it could be the perfect solution to a major problem he noticed in digital advertising.
“When businesses set up ads online, they transact through ten different intermediaries before their ads reach the end website where they will be displayed,” says Ian. “What comes out on the other side is an ad with 75 percent of the value removed. The end website and the end publisher only get that small amount of money for that ad and you lose a lot of value because they place it in a worse position.”
Ian’s devised a system on the blockchain to make sure the websites publishing ads received the full value of the ad payments from the original ad creators.
“I thought of a system to give the websites publishing the ads this token representing their original value. But then I had to find something for them to do with it. I thought ‘Hey, let’s just give them a Visa card paired with the token so they can spend it like cash.’”
Ian quit his high-paying job in Manhattan, sold his house, and moved to New Jersey. He didn’t take a paycheck for two years and lived off savings to start his business.
“I had no health insurance, no nothing. I was all in. Even today, I work seven days a week, but back then, it was 10 to 12 hours a day. I’d try to wear as many hats as possible and not burn out. I think all entrepreneurs do that if they’re serious about starting a company.”
The original team was Ian, his co-founder (a previous client of his running ads on blogs he owns), and two developers. They generated a lot of initial interest in their product but little initial revenue.
“For about nine months we hit things hard,” says Ian. “We were meeting with some of the biggest ad agencies in New York. But at the end of the day, no one was giving us money.”
However, they began to receive calls from businesses they didn’t expect. “There were a ton of customers in this space who held digital currencies. They came across our business somehow and they were like, ‘Man, I just want to use your card. I don’t have a blog, but can I just get one of these cards?’”
Ian and company realized using the blockchain for advertising wasn’t profitable. What people wanted was a card to free the cash value of their crypto.
“That’s how we started the Block card,” says Ian. “It’s a Visa debit card you can put your digital currency on. We decided to give people rewards on the card too. Then we began to offer bank accounts. Then other companies in the space started asking, ‘How did you guys do this card?’ so we started whitelabeling it.
Landing a Real Visa Deal as a Crypto Company
What set Unbanked apart from other crypto custodial companies at the time was his deal with Visa.
“Using one of our cards you can transact anywhere on the Visa network. So any merchant that accepts Visa cards will now accept cryptocurrency,” he says.
For a while, most crypto companies were skeptical that Visa would willingly work with cryptocurrencies. Ian says that misconception came from sketchy business practices at the time.
“Four years ago, a lot of crypto companies were either bulk-buying Visa gift cards or they would go through a reseller of a reseller to get a Visa card to give to their customers. After that, they’d go to market and say they had a partnership with Visa. Visa clamped down on that real quick and the knee-jerk reaction in the crypto space was ‘Oh my God, Visa hates crypto, look at this, they’re trying to shut it down.’”
Securing a bona fide Visa deal took effort, but Ian took the time to forge connections with banks that let him get debit cards the legal way.
“I’d say 99 percent of banks weren’t crypto-friendly when I started,” he says. “Banks have a strong regulatory moat so they’re not incentivized to take risks or push new technologies. We ended up finding that the bigger banks and even the second-tier banks would always say no. However, third-tier and community banks were looking for a differentiator to gain a competitive edge.”
By approaching these small community banks and credit unions for preferred agreements, Ian says he was soon able to create debit accounts for crypto holders.
“We’d approach these smaller community banks and say, ‘Hey, this is what we’re trying to achieve here. Can we work out a preferred agreement that will bring you a ton of customers?’ I think the smaller banks see that this isn’t a zero-sum game. It’s not like if they support crypto they’re gonna go out of business.”
Soon, Ian built a growing network of banks issuing legal Visa debit cards to crypto holders throughout the United States.
Creating a Card for a Crypto Community
One of Ian’s favorite achievements was landing the Litecoin Foundation as an early client for their white-labeled Visa cards. Getting an entire crypto community onboard helped cement Unbanked in the crypto-verse.
“I was at a crypto conference,” says Ian. “Two, three years ago these conferences were still relatively small. I think we were in some hotel lobby. There was a guy from the Litecoin foundation there and we demonstrated to him our proof of concept for our Block card. He said, ‘This thing is awesome. I wish we could do this for Litecoin and I said, ‘We can whitelabel this technology for you.’
“He set up a call with Charlie Lee, the founder of Litecoin. Lee came to me and said, ‘I’ve had two other companies say they will do this for me and they failed. I’m not even going to talk about it until you deliver a card.’ We got it done in six months. I’ve got a video on my YouTube channel of Charlie showing it off on Bloomberg. That’s how we made a complimentary feature of the business our entire business.”
Litecoin adopting the Block card had the entire financial world talking. It even changed Unbanked’s relationship with Visa. “Visa came to us and said, ‘Wait a second, we’ve got a ton of crypto companies. Can you guys do this at scale?’ And then we didn’t just have their approval. We had a partnership.”
Unbanked’s “enablement-partnership” with Visa set them up for much quicker growth. The finance giant now sends clients to Unbanked.
“Visa has this thing called the fast-track program where companies wanting Visa products contact Visa and then Visa kicks them over to an enablement partner,” says Ian. “Today we are Visa’s only crypto-focused enablement partner. We’re getting the attention of larger companies in the space and we just joined MasterCard’s program for Europe.”
Getting the Bankless Into the Global Economy
According to Ian, Unbanked today is more than just a card for spending crypto. He has created an entire banking system on the blockchain that works in real life.
“Let’s say you want to buy some Bitcoin with your USD. We’ll fire up an FDIC-insured bank account for you and you can convert from USD into Bitcoin or other cryptocurrencies suitable for a self custodial wallet. If you already have cryptocurrencies, you can send them to a custodial wallet paired with a Visa debit card. You can then spend that cryptocurrency at 70 million merchants worldwide – anywhere Visa is accepted.”
Like with a credit card, Unbanked gives customers cashback when they spend. Unlike credit cards, they have much higher cashback rates – especially if customers hold their funds in their native token, UNBNK, based on the Stellar blockchain. While an average credit card might give you back $1 for every $100 spent, Block cards can give you back up to $6.
Unbanked isn’t just a tool to give American crypto holders more options for their crypto. Ian also wants to use it to make a more globally accessible financial system.
“There are so many people unbanked or underbanked around the world because they can’t pass KYC (Know Your Customer) checks. That means they can’t participate in a global ecosystem. However, if you have a mobile device, you can then set up a crypto wallet and start participating in this global economy. The hard part becomes bridging them together.”
Ian defined a use case he hopes will become increasingly common through the Unbanked system.
“Let’s say somebody from a Latin American country is working in the US and wants to send money back to their family. Let’s say they’ve got a mobile device and know their family’s wallet at home and that wallet is paired with a Visa card. They could earn Bitcoin and send it to their family’s custodial wallet in Latin America so they can buy gas and groceries.”
While transacting through the blockchain can be slow, Ian thinks its twenty-four-hour operating times and automatic transaction processes will shake up the banking industry.
Cash isn’t going to move from nine-thirty to four-thirty anymore. It’s going to be global and twenty-four-seven
“Transfers are about to be a much more seamless process. I think Western Union and MoneyGram will go out of business soon. They thrive on ten percent fees for remittance which is just absurd. There are trillions of dollars of value there. Cash isn’t going to move from nine-thirty to four-thirty anymore. It’s going to be global and twenty-four-seven.”
Today, Unbanked’s cards are live in all 50 states, going live in 27 European countries next month, and soon to be live in 29 Latin American countries. Their bank accounts work in even more regions. “Our bank accounts are now live in 200-plus countries and territories. So basically any country that’s not on the OFAC (Office of Foreign Asset Control) can get a bank account with us.”
A Crypto Business Embracing Regulation
Ian says at Unbanked, their stance on regulation is that it is inevitable. He thinks crypto businesses should help regulators understand what crypto is really about.
“Regulation is coming,” says Ian. “As a company, we want to work with regulators to help them understand what we’re doing. Digital currency is not used for buying drugs and hiring hitmen. It’s actually easy to track funds on the blockchain and prevent crime.”
While doing things the legal way was slow and arduous, Ian hopes long term they’ll be that much better for it.
“We think it will pay off to be a US-headquartered company instead of incorporating in the British Virgin Islands. A lot of our investors are people who like crypto and know it’s the future but don’t necessarily want to go and buy Bitcoin. They want exposure to companies that have exposure to the space while operating in an environment that is regulated by the SEC.”
Unbanked’s Move Into NFTs
Like many crypto companies, Unbanked has recently moved into the NFT business. They created a special series that gives customers extra cashback on purchases.
“We had a pretty loyal community invested in us. We wanted to launch an NFT for them and also use it as an onboarding mechanism. We decided that’s our yield product. Anybody who holds one of our NFTs ends up netting out 20 percent more of our net yields. We called the NFT ‘Bankers’ because we’re Unbanked. We hired the artists who created a well-known NFT collection called Pudgy Penguins to create the characters.”
Like the founder of former Bootstrappers company, Single Music, Ian believes NFTs are not so much about the value of the art as the value they bring to the real world.
“I think of NFTs like a country club membership. When you join a golf club you need to buy a bond and that bond is ownership in this club. If you want to leave the country club, you need to find somebody else to buy the bond.”
In the future, Ian wants to create further functionality for his NFTs. Perhaps as a tool to spread wealth even further.
“One of the things we’re toying with doing now is a leasing feature. Say you own a Banker but you don’t necessarily have any capital to put in a yield account. What if you could take your Banker, lend it to your friend, and they use their capital and you get ten percent of their yield? That was something our community suggested.”
Ian thinks the fast adoption of NFTs is a sign of things to come in the crypto and “web3” world.
“I think web three companies are very well positioned because they’re quick to capitalize on trends. Bored Ape Yacht Club came out of nowhere and is now valued at billions of dollars. They just acquired crypto punks and got a deal with Adidas. They went from nothing to running ads in the Super Bowl. The next trillion-dollar brands are something that somebody’s just building today, working in the dark.”
People who give up early end up going to work for somebody else.
For other founders, Ian has this to say:
“I think persistence is key. Progress is always two steps forward and one step back. There were plenty of times when I thought we were going out of business. People who give up early end up working for somebody else.”
Unbanked’s success comes from two distinct actions: embracing a heavily regulated industry and listening to its customers. Ian and his team knew after nine months of beating against the walls of advertising that the market wasn’t there. They changed tracks and became the frontrunners of a trend that soon swept the crypto world.
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