Bitcoin (BTC) has surged this year thanks to an influx of money from traditional institutional investors via exchange-traded funds (ETFs). Likewise, integrations by traditional retail payments players — Visa and Mastercard — could push the crypto market to dramatically higher valuations in the year ahead.

Despite explosive growth, crypto's daily active users still pale in comparison to mainstream apps like TikTok. To truly achieve mass adoption and retention, the ecosystem needs high-utility use cases that drive frequent engagement.

Payments show promise but are served by strong traditional players and remain heavily regulated. However, complementary cryptocurrencies for loyalty rewards hold untapped potential.

Related: Bitcoin just hit a record in open interest — expect imminent volatility

There are promising local announcements, such as the Polygon blockchain’s loyalty program “Starbucks Odyssey” in the United States; Flipkart’s “Firedrops” in India; and Kai-Ching loyalty points by the Kaikai AI shopping app in China, facilitated by a partnership with NEAR Protocol (NEAR). However, only global payment networks — that is, major credit cards — can foster a truly global approach to retail crypto rewards.

While novel, even radical financial models emerge, adoption requires meeting consumers where they are. So how can crypto blend into deeply ingrained retail habits?

Crypto cards: catering to the niche, not the masses

While crypto debit and credit cards have gained popularity among digital currency enthusiasts, these products have shown limited effectiveness at bringing mainstream consumers into the crypto ecosystem. Currently, card holder demographics are heavily skewed towards existing community members, missing vast potential for broader adoption.

Even with perks like earning up to 5% of cryptocurrency on spending and discounts at major apps like Spotify, Airbnb and free access to business lounge areas at airports, the average user sees too many barriers preventing the leap to unknown territories of digital assets. Large players like Crypto.com have invested heavily in user acquisition, but have not managed to expand far beyond crypto's core community, as their offerings grow increasingly unappealing even for early adopters.

Driving transactions alone clearly falls short of converting casual observers into participants. However, loyalty mechanics are a universally recognized concept for the majority already earning incentives on regular purchases. Perks and discounts at grocery stores, coffee shops, gas stations are an intuitive drawing card. If thoughtfully designed, such familiar Web2 tools could seamlessly blend with the novel world of Web3 through embedded crypto rewards, payments and experiences that lower the learning curve.

The hardest part in realizing the potential of crypto incentives on everyday purchases is overcoming the fragmented loyalty ecosystem — vast networks of partnerships, point integrations, legacy infrastructure. This poses barriers for agile startups aiming to disrupt retail rewards.

However, recent announcements by established networks Visa and Mastercard demonstrate a vision for another path. Rather than outdated players to compete with, they could be ideal partners to drive the next wave of crypto mass adoption.

Visa bets on platforms and white-label solutions

Visa has established itself as one of the most crypto-forward major payments companies. It was an early player enabling crypto debit and prepaid cards allowing spending from digital wallets. The firm is actively developing blockchain capabilities like its Universal Payment Channel for business transactions. Visa has also filed numerous metaverse, nonfungible token (NFT) and cryptocurrency trademarks, anticipating Web3 will dominate digital commerce.

In a recent partnership with SmartMedia Technologies, Visa announced a new “Visa Web3 Loyalty Engagement Solution” that allows merchants to create crypto-powered digital engagement campaigns including NFT tickets, loyalty coins and augmented reality scavenger hunts. SmartMedia has Web3 marketing campaigns in their portfolio, but neither has used Visa transactions data for them yet. It will be fascinating to see which brands are first to trial this new offering this year.

Mastercard favors end-to-end services

Mastercard favors a controlled, incremental utilization of cryptocurrencies. The company shows receptiveness toward government-backed central bank digital currencies (CBDCs) and stablecoins tied to fiat. In 2021 Mastercard launched the Bahamas Sand Dollar in partnership with The Central Bank of the Bahamas and Island Pay — and reaffirmed its receptiveness to digital forms of centralized bank-issued currencies in its 2023 policy priorities.

This cautious strategy focuses on readiness and compliance over direct innovation. As a result, Mastercard views loyalty programs as a way to refresh outdated systems by integrating digital assets when ready. To ensure utilizing these features, the company teams up with “end-to-end” solutions which are already familiar to an ordinary consumer.

In partnership with my own mobile payments app, Swoo, Mastercard ran a pilot that offered crypto-backed cash back on credit card spending in January 2024. The key goal of the campaign was to promote mobile contactless payments in Eastern Europe, while using crypto rewards as an effective engaging incentive to users. More than 17,000 users earned crypto rewards for the first time simply by shopping as normal — and they increased card spending by 56%, a win-win-win model that could scale globally.

Challenges remain

Loyalty can be a win-win-win solution for users, traditional payments players and the industry to overcome major crypto adoption obstacles.

Some of the top challenges include:

Despite these challenges, loyalty programs act as complementary incentive layers above regulated payments. Visa and Mastercard’s weight will lend legitimacy to crypto amid regulatory uncertainty.

Likewise, incentives emphasize utility over complexity. Integrating crypto with credit cards will enhance user experience.

Related: Bad blockchain forensics convict the user of a Bitcoin mixer — as its operator

Partnerships with trusted financial brands also improve reputation. As pivotal players, Visa and Mastercard's support signals crypto rewards are going mainstream. This drives confidence.

Cash still dominates global commerce. Surveys from November 2023 showed more than 65% of point-of-sale purchases in some emerging countries were still being conducted using paper money. By embracing crypto-powered loyalty programs, legacy payments giants like Visa and Mastercard gain a global tool to attract the unbanked and underbanked while combatting stagnant cash usage.

Blending tokenized rewards into routine spending provides the perfect conduit to not only engage existing cardholders, but also onboard the billions of consumers who remain on the sidelines of digital payments.

In previous bull runs, most attention and capital were allocated to capital-markets tools, protocols and memes. Those cater to a small group of professionals. Now technology is mature enough to improve everyday lives on a mass scale. Partnerships with traditional industry giants could be one of the fastest and most sustainable means to that end.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.