Infini exits, U card declines? Perspective of the end and way out of Crypto payment

Author: Web3 Farmer Frank

On June 17, Infini suddenly announced a complete closure of all Card services.

As a star project in this round of U card craze, even though it encountered an operational crisis of about $50 million in funds not long ago, Infini has not shut down its services, but now it has chosen to voluntarily withdraw. The explanation given by Infini @0xsexybanana is quite representative:

" The compliance costs are extremely high, the profits are thin, and the operation is heavy... strategic adjustments have been made and some of the to C card business have been removed."

This reflects the true situation of this business - focusing on compliance investment, small profit returns, and high risks. After all, since last year, PayFi narratives have been high, especially in the first half of this year, U-card projects were launched in large numbers, and it was a fire, until Infini's sudden exit.

Source: @0xsexybanana

This makes people ask: Is U card a good business?

" U card" has never been a good business

To discuss the issue of U cards, one basic premise that needs to be clarified is that the current question on the market is not the direction of "consumption with cryptocurrency", but the feasibility of the operating model behind the "U cards" that highly relies on traditional financial intermediaries.

To put it bluntly, since the word "U card" began to be widely accepted, it basically refers to a specific business operation model:

From the early Dupay to the later OneKey Card and Infini, they are essentially the form of overseas prepaid consumption cards. The Web3 project obtains authorization through cooperative financial institutions and card organizations (such as Mastercard and Visa), and then packaged into an "off-chain consumption solution" that encrypted users can use.

Functionally, this model connects consumption links by aggregating third-party intermediaries, swaps stablecoins and other fiat currencies into US dollars and recharges them into prepaid cards, which has greatly alleviated the problem of Web3 users' "spend Crypto directly/passing". It is a convenient solution in the Off-Ramp scenario, and it can also be regarded as a transitional product that combines Crypto with existing card payments in a specific historical stage.

But in business, it is an extremely fragile business, because the lifeblood of the entire "U card" operating model lies in the fact that its business model relies heavily on the licensing and stability of tripartite institutions.

Taking the common U card issuance logic on the market as an example, they are usually issued by Web3 project parties in cooperation with traditional financial institutions (banks and other card issuing institutions), presenting the three-level architecture of "card organization-card issuing institutions-Web3 project":

• Card organizational layer (such as Visa, Mastercard): Master the access rights of core card number (BIN) resources and clearing system;
• First-level card issuers (such as DCS, Fiat24 and other licensed financial institutions): responsible for compliance, regulatory docking, fund custody and risk control execution;
• Web3 project parties (such as Infini, Bybit): responsible for front-end product packaging, user traffic diversion and promotion operations, but essentially just a "second-level operator" that rents licenses;

This three-layer architecture seems to have clear division of labor, but the project party is actually at the end of the ecological chain with the lightest authority, the greatest responsibility and the highest risk , and lacks the bargaining power between card organizations and card issuers. Once the source of user funds is questioned, or sensitive behaviors such as money laundering and inflow of telecom funds occur, even if there is no clear violation, the issuing bank or card organization may cut off cards and seal accounts based on the "risk prudence principle".

The more realistic problem is that the U card business itself naturally faces high-risk scenarios of being abused by telecom fraud gangs, and the project party does not have endogenous cash flow services such as "processing fees" as buffers like the exchange. Instead, it must directly undertake the potential losses and regulatory obligations of C-end users.

Under this model, once an accident occurs at the regulatory level, card organizations and upstream banks will usually pass all AML (anti-money laundering) fines to the project party, at the least, deduct the margin, and at the worst, directly terminate the cooperation - and intermediary service providers and payment channel providers are only responsible for collecting service fees and tolls, and never bear substantial risks, which also explains why a large number of U card projects can only last for a year and a half.

Therefore, the self-reported by the founder of Infini on "99% of the time and cost investment, bringing 0 income" is not an exaggeration. In this chain, the big head is indeed eaten by the issuing agency, and the project party is just struggling with small profits. The real profit needs to be based on huge transaction flows + asset precipitation + high-frequency consumption scenarios, but at the same time, compliance and operation and maintenance costs will also increase exponentially with the business amplification.

Moreover, the judgment itself also implies a premise - that is, the project party is always at the end of the supply chain, and is limited by its positioning as a "second-level operator", and cannot intervene in the upstream. This also shows that U cards such as Infini are difficult to survive are not the fate of the industry, but the path selection problem:

Projects that really want to break through the profit bottleneck need to move upward, enter the account system, and enter the compliance layer, rather than relying solely on the second-hand or even third-hand and four-hand capabilities provided by BIN Sponsor such as Interlace.

In fact, projects that are still providing similar services on the market are no longer pure U card products that do "on-chain diversion + off-chain splicing". Take SafePal, imToken, and TokenPocket as examples. These three companies are all based on Swiss bank Fiat24. It can be said that they are of the same origin, but the integration path and entry strategy are different:

• SafePal takes into account personal bank accounts + joint MasterCard services, and places Bank services on the first-level page of the first-level entrance;
• imToken, as a Fiat24 partner, mainly uses Mastercard services. Its functionality hides bank account services compared to SafePal, but also places the "card" in the first-level entrance;
• TokenPocket is more obscure. The service entrance is buried in the secondary entrance and is mainly based on MasterCard services. The Android system requires downloading the Google Play version to enable it;

From left to right, the SafePal "Bank" page, imToken Card entrance, TP Card entrance

Especially, SafePal, which directly enters the card issuance and account levels through strategic investment in Fiat24, is no longer the "second-hand dealer" at the end of the chain. It fundamentally reduces the friction and expenses in the middle links, and can give back this advantage to users, providing preferential policies such as free account opening fees and 0 deposit and withdrawal fees.

However, for wallets/exchanges, U card services are not the main business and are just a plus for Web3 hosting/non-custodial services - they can divert traffic and attract customers, as well as long-term loyalty and subsequent AUM. From this perspective, it is acceptable to not make money in the short term or even lose money.

Therefore, as a plus point to improve user loyalty and asset service stickiness, the main players are almost all wallets and exchanges. The former is represented by SafePal, imToken, TokenPocket, Bitget Wallet, and the latter includes head exchanges such as Bybit and Bitget.

Just like in the previous article " The Crypto Payment Cards Are Chaotic Era, a business that is difficult to last? As mentioned in 》, Web3 wallet naturally has the ability to manage crypto assets and is an ideal PayFi service carrier. It can also build a longer-term odds structure from the perspectives of traffic diversion, AUM, user binding, etc., and the same applies to the exchange.

Ultimately, in such a financial application scenario with strong supervision, tight compliance, and low profits, if you only rely on the form of accumulation of bureaus and subsidies to try to promote it, it will be a very difficult bone for the Web3 startup team that has no main traffic base and lacks the underlying financial awareness. This is also the fundamental reason why Infini finally chose to give up consumer U cards and focus on financial management and B-side services.

Crypto to TradFi is a good business

Is the U card itself useless?

Not so.

As mentioned above, U Card has indeed completed its phased mission at the historical node of its birth: to help global crypto users realize the rapid implementation of on-chain assets, bypass the cumbersome fiat currency withdrawal process, and through the form of prepaid cards, Crypto assets can be detoured into the real world.

As an Off-Ramp fast channel for early Crypto users to connect on-chain assets and daily consumption, even if U cards rely heavily on traditional financial infrastructure such as Visa and Master, it is not a profitable business, but the user needs it meets are real.

If compared, it is more like the telephone ordering service before Meituan and Ele.me became popular. It has indeed improved in user experience, but it is still a stitching product under the old system. It does not have sufficient scale and structural stability, and will eventually be destined to be replaced by a better solution.

Interestingly, just before and after Infini announced the closure, in the early morning of June 18, Beijing time, the U.S. Senate passed the GENIUS Act, which is hailed as a milestone in crypto payment legislation, with 68 votes in favor and 30 votes against. The bill is likely to be reviewed by the House of Representatives during Trump's term and officially signed and taken effect.

Source:Politico

This means that stablecoins and stablecoin payments are ushering in a more compliant and institutionalized reshaping cycle. The era of grassroots is coming to an end, and a new round of PayFi opportunity window is opening.

Therefore, the real question is, what kind of financial entrances and exits do encrypted users really need?

The answer may not be a U card, but a compliant, stable and scalable financial account system - it can not only "spend" U, but also complete "on-chain-off-chain" two-way circulation, realizing a true closed loop of asset flow.

In other words, U cards are destined to be replaced by licensed banks with regulatory qualifications and risk control capabilities. Traditional financial institutions will more actively embed Web3 payment paths and usage scenarios. On the basis of ensuring compliance, they will complete the full link connection between user wallets, merchant collections, and asset deposits and withdrawals through bank accounts, payment channels and clearing systems.

This is also the current path that mainstream wallets such as SafePal, imToken, and TokenPocket are now taking. They no longer use cards as the core selling point, but cooperate with licensed bank Fiat24 to open up the financial entrance and exit from Crypto to TradFi around account compliance and deposits and withdrawals. Card services are just supporting tools.

As the Principal Member of MasterCard, Fiat24 can bypass intermediary service providers and directly connect with the central bank (ECB) and card organizations, so it can achieve lower card issuance costs and transaction fees. The Swiss FINMA financial intermediary license it holds also allows users to open regulated bank accounts of the same name to achieve compliant mutual transfer between stablecoins and fiat currencies, which is a clear upstream advantage that is different from players such as Infini.

SafePal 's "Bank" service supports brokerage and CEX deposit and withdrawal services

Taking SafePal's "Bank" service as an example, it strategically invested in Fiat24 as early as 2023. From the perspective of business structure, it does not need to rent a license as a "second-department dealer". The essential difference with pure card businesses such as Infini is that by directly mastering the account system and card issuing resources, it breaks through the limitations of "second-level operators" and can achieve a better balance between cost and risk control.

For example, the rate discount for "free deposit and withdrawal and free account opening and card opening fees" provided by SafePal to the community is a structural cost advantage that most projects that are still in the "outsourcing card issuance" stage are difficult to achieve.

In addition, the bank account system based on Fiat24 also enables it not only to support daily card swiping consumption, but also opens up key scenarios of closed-loop funds on and off-chain funds:

• Brokerage deposit/withdrawal: Users can convert crypto assets into euros and transfer them to mainstream brokerage accounts such as Interactive Brokers, Charles Schwab, Tiger Brokers, etc. through SEPA remittance, so as to realize cross-market allocation of on-chain assets;
• CEX channel deposit and exit: Support transfers to exchanges such as Kraken and Bitstamp that support euro deposits, or withdraw cash in reverse to personal bank accounts, avoid gray OTC risks, complete the deposit and exit path between coins and fiat currencies, and the capital chain is clear and compliant;
• Off-chain funds return: Through cross-border payment service providers such as Wise, users can even indirectly transfer euro remittances back to domestic bank accounts or Alipay and WeChat, realizing the closed-loop transfer of assets from the chain to the local system;

This whole path far exceeds the traditional U card 's imagination of "scan the end with just one purchase" and truly has account attributes, compliance capabilities and service extension.

From U card to account, to future "stablecoin payment"

From a business logic perspective, the "this card + account" model is obviously more structural resilience and growth potential. Compliant banks dominate accounts and supervision, while Web3 wallet focuses on the interaction between asset portals and users on the chain. The two form a collaborative architecture with clear responsibilities and complementary positions, which is far more sustainable than the pure card business promoted by the project party alone.

The author always believes that Crypto and TradFi have never been opposite, but are accelerating the evolution of integration and leveraging each other. After all, TradFi is good at compliance supervision, account structure and risk control system, while Crypto has natural advantages in asset openness, programmability and trustless execution.

Therefore, before the complete transformation of the payment system in the future, the most stable, realistic and sustainable path will still be the compliance account and clearing settlement system led by licensed financial institutions, while the Web3 project focuses on the on-chain entry and asset operations, forming the optimal combination of compliance and flexibility.

This model is the current solution. Although it may not be high profit, it is very structurally resilient. It is the most implementable PayFi solution at the moment. It is also the path taken by SafePal, imToken, etc.: it cooperates with Fiat24 to provide real and available IBAN accounts, Mastercard payment cards, SEPA channels, and the compliance and withdrawal capabilities of securities companies and CEXs, realizing the closed loop of assets on and off the chain.

If the timeline is extended, the ultimate form of PayFi may be an on-chain payment network that completely leaves Visa/Master:

• Merchants accept stablecoin payments and no longer convert fiat currency;
• Users issue transactions directly from their wallets, and funds are self-custodial and liquidated on-chain;
• The backend is supported by compliant stablecoins and clearing and settlement networks, and does not require Visa/Mastercard or SWIFT channels;

In fact, this trend is already happening, from Circle's launch of Programmable Wallets and CCTP (cross-chain USDC clearing), to global payment giant Stripe's acquisition of stablecoin API service provider Bridge for US$1.1 billion at the end of last year, all of which are trying to connect on-chain accounts, stablecoin assets and merchant collections, and bypassing card issuing banks and card organizations in traditional payment links.

This also shows that traditional payment network giants no longer "beware of encryption", but instead actively integrate their chain capabilities and move closer to the Web3 account structure and stablecoin clearing network. Only then can this system truly bypass the high cost and inefficiency bottlenecks of traditional payment systems, and may even surpass existing cross-border payment solutions such as Airwallex and Wise in terms of cost and experience, and become the next generation of global payment infrastructure.

But that's the future.

It can be foreseeable that U cards belong to the "historical completion time", the current compliant bank account model of SafePal/Fiat24 and other companies is "in the present", and the on-chain stablecoin clearance and settlement network is the real "in the future time".

In the end, whoever can penetrate the evolution path of these three-layer structures is qualified to gain a place in the next round of payment paradigm changes.

Written at the end

Therefore, Infini's exit is just the natural end of a transitional product that is destined to be replaced by U cards.

We may think of it as a tentative connection between the Web3 world of the real world when the compliance channel is not yet clear. It has fulfilled to a certain extent the historical mission of "let Crypto spend it".

However, as the regulatory red line becomes clearer and the status of stablecoins continues to rise, users ' demands are shifting from "can be swiped" to "can be circulating, can manage finance, and can be closed-loop", and it is necessary to truly build underlying capabilities, especially the two-way synergy between Crypto and TradFi.

The next PayFi game is no longer on the card.