The new Argent/Kulipa debit card is a harbinger of change

As an investor, it’s always exciting to see portfolio companies collaborating. Such partnerships are a win-win-win, addressing one of the biggest challenges for early-stage businesses: securing pilot projects to scale. Fabric Ventures, led by my colleague Eleanor Hudson and supported by the entire investment team is nurturing these synergies within our portfolio. Sometimes the results are subtle, like shared lessons, but other times they are transformative — like the recently announced Argent-Kulipa Mastercard debit card which is needle moving

Argent is renowned as the most user-friendly mobile wallet for crypto and NFTs, offering the seamless experience we expect in the neo-banking era. With a strong focus on security — featuring 2FA, fraud monitoring, and no seed phrases — Argent leverages smart contracts to enhance usability with features like session keys, 1-click transactions, and flexible gas units. Importantly, it achieves all this as a fully self-custodial wallet, abstracting the complexities for mass-market users.

The desire for crypto wallets to “close the loop” between web2 and web3 is obvious, when mass market users know they can withdraw and use their funds on chain as easily and efficiently as they are used to with a bank account, they will be encouraged to on ramp more. When Argent decided to launch a card linked to its wallet, it sought to disrupt the status quo of crypto card solutions by delivering a true debit card experience instead of a prepaid one. Achieving parity with fiat debit cards was no small feat, especially given the industry assumption that only centralised exchange solutions, like Coinbase, could offer such functionality due to their custody of funds. Whereas typically, the self-custodial card solutions offered an inferior experience or players morphed into on chain yield solutions which introduced a custodial component.

But Argent didn’t compromise. Why should users accept either centralisation or inferior experiences for spending their crypto in the real world? To realise this vision, Argent partnered with Kulipa, made up of a team of card experts, to deliver a new experience and a harbinger of change:

1. Continued move beyond centralisation: We have had DeFi. Now this is a significant step in enabling self-custodial dApps to participate in real-world financial services as well via the card.
2. Improved user experience (UX): Unlike prepaid card systems, the Argent-Kulipa card eliminates manual fund transfers to a “custodial wallet” ahead of the spend decision, offering seamless “top-up” ledgers. Kulipa’s solution also leverages Argent’s session keys to solve the inherent double-spend risks, setting it apart from other self-custodial options like Gnosis Pay, which requires the user to open a new wallet just for their card and a movement of funds happens to dedicated Gnosis Safe “checking account” .
3. Removing financial hurdles: Whereas prepaid card users are used to being scammed on fees, the mass market expects debit card fee structures and cannot be expected to foot gas fees. By abstracting transaction fees away from users and enabling 3rd parties to pay gas on a user’s behalf, the card mirrors the cost structure of traditional debit cards. Kulipa achieves this through native account abstraction on StarkNet, avoiding reliance on intermediaries like Gelato.
4. Shop with peace of mind: Closed loop prepaid cards (such as gift cards) and anonymous prepaid cards (which most first generation crypto cards are) do not qualify for chargeback/refund guarantee programmes by schemes such as Visa. In general merchants are always reluctant to offer chargebacks with anonymous prepaid cards.
5. Improving the success of the transaction: A true debit experience improves the card success acceptance rate in the real world vs. prepaid cards. Several merchants don’t even accept prepaid cards due to the inherent fraud risks.

Crypto card development is about more than writing code — 70% of the effort is a focus on compliance, financial risk management, and navigating the fiat card financial processes. These are not trivial as seen recently with Wirex’s card issuer UAB PayrNet. Kulipa’s expertise bridges exactly both sides, delivering both superior UX and scalable fiat-world operations, a necessity for any successful crypto card solution.

Looking forward, this partnership sets the stage for broader a disruption in card based financial services:

1. Instant on-chain merchant settlement: The current launch is end user focused. Future iterations could benefit merchants as well, by creating an entirely new end to end card acceptance and settlement process on chain (bypassing traditional networks like Visa or Mastercard) so that merchants receive faster payments with reduced fees. With wallet partnerships on both the consumer side (such as Kulipa/Argent) and wallets for the merchant, it is possible to push both the consumer and the merchant to accept blockchain payments. A similar economic incentive is behind PayPal’s stablecoin issuance given it has a rich closed loop network. With on-chain settlement between Paypal customers, they can reduce the settlement time and the fees they pay Visa and Mastercard as the merchant of record and choose to what degree to pass on these savings in user growth incentives or merchant discounts.
2. Addressing web2 inefficiencies: Current web2 card systems are rife with inefficiencies (such as the above merchant settlement) and opaque rules (such as the rules set by the schemes and the calculations for the fees). A decentralised alternative could lower costs for merchants and incentivize them to pass savings onto consumers, creating a fairer system. Mainstream success could be found by unrooting this odious high fee structure that schemes impose on merchants. Blockchain innovators could cut into this financial services “racket” by allowing merchants to charge lower fees for users of its on-chain settled cards through discounts to consumers. They could circumvent the scheme fees and could send merchants rewards (to pass on to consumers) for charge activities using their cards, from some of the interest received from the fiat that back the stablecoins used.
3. Further decentralisation: Current solutions (incl Kulipa) are not fully decentralised because there is a need to collect the settlement funds from the user wallet in an offramp account (for stablecoins), swap with Circle, and then manage a settlement account (for the fiat) before the fiat funds get transferred to the merchant acquiring bank account. This centralised actor in turn needs to be regulated (e.g. an EMI) to touch these funds. By running or partnering with an L1 or L2 that is optimised for processing and payments there is a potential to enable a self-sovereign banking experience.

Until full disruption is possible, playing within existing ecosystems has advantages: Visa and Mastercard offer a trusted and branded network, fraud protection, widespread global acceptance, BIN sponsorship introductions, settlement networks, connectivity technologies and they approve the issuing bank members (Kulipa in this case).

These schemes also provide a scalable business model to tap into, where merchant funded interchange fees are shared among stakeholders. Proven and scalable business models are so rare in web3 and bring a new (non swap) revenue stream to wallets such as Argent. Whilst these are often capped by regulators and wont make or break a wallet as a sole source of revenue, they can be quite attractive especially for transactions that have richer interchange fees ie those that involve cards that are cashback/travel points, are business cards or from card-not-present usage such as in ecommerce (due to higher risks to manage). Having this revenue stream can at least allow the wallet to not charge consumers for the actual card mint/sign up (beyond its cost).

This economic web2 flywheel also benefits the partner card as a service provider who takes on the “card issuer bank” role themselves (alongside the technology). Not only do they share in the interchange with the wallets but teams, like Kulipa, who understand these models and have the right relationships can pull off some attractive negotiations with the schemes to also participate in scheme fees for an introductory period and reduce collateral required for the regulated card issuer partner company.

What web3 card solutions should avoid is charging users. Unfortunately many either turn to managing yield (in a web3 bank with card) or they charge users directly (transactional or high upfront fees). Several crypto card offerings who have simply taken it upon themselves to mimic the complexity of the various card fees seen in the fiat world and forgetting the purpose is to rethink the failings of these web2 economies not inherit their bad behaviours: On top of charges for the required crypto to fiat conversions (which some are charging excessive %s for) , I’ve seen charges for topping up the card (required for prepaid cards), and charges for a litany of other account actions, including outgoing fiat payments, fair usage charges, and account pin number change fees. In addition, many web3 solutions using prepaid cards might have very little incentive to move to a superior debit model because they are reaping the higher interchange fees on prepaid cards (because of the higher fraud risks).

This behaviour will not scale: Prepaid card users in web2 are used to these types of extra fees and high transaction fees, the mass market users of debit cards are not. The Argent card changes the game here in delivering a more transparent and equitable system. The Argent-Kulipa card is more than a product — it’s a harbinger of change. It reimagines what financial services can be in a web3 world, where decentralisation, user empowerment, transparency and fairness go beyond just removing existing middlemen.

Every crypto wallet should be paying attention. And for those looking to innovate in this space, Kulipa is the team to call.

For more information on Fabric’s portfolio, opportunities and our investment thesis please visit our website and follow us on Twitter, LinkedIn, Farcaster & Orb.