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Merchant-Funded Rewards: How They Work for Crypto Cards

Merchant-funded rewards are cashback offers that a brand pays for instead of the card issuer: in Kard's description of the model, "the merchant covers the reward, and you take a cut for providing the distribution channel." The issuer gets a cashback line it doesn't pay for, and the merchant gets a customer it can measure.

Most guides to this model are written for US banks and neobanks. This one is for crypto Card programs. It covers how the model works, who runs it today, why it fits a crypto card poorly, and what a version built for crypto looks like when the funder is a trading venue or prop firm instead of a supermarket.

How merchant-funded rewards work

The mechanics are the same across vendors. A brand sets an offer ("10% back at our stores this month"). The offer network matches card transactions against active offers. When a matching purchase posts, the cardholder is credited and the brand pays the cashback plus a fee.

Two details decide how well it works in practice:

  1. Activation. Many card-linked offer setups ask the cardholder to tap "activate" on each offer first. Kard's guide says most software works that way, and that Kard also matches transactions to active offers automatically, with "no manual step required from the consumer."
  2. Where it earns. Cashback only comes from purchases at participating merchants. A cardholder who never shops at one earns nothing, however much they spend.

The issuer's side of the deal is a share of the brand's payment. Kard's guide says the issuer receives a share of each matched purchase but doesn't publish the split, and none of the vendors we read do either.

Who runs card-linked offer networks

Three names come up whenever a card product team looks at this category.

Network How it describes itself Published reach Says who funds it?
Kard Merchant-funded cashback through issuers' apps Not stated in the guide Yes: the merchant
Cardlytics "The largest card-linked offer network" "Nearly 215M engaged shoppers"; "1 in 2 card swipes nationwide" Not on its homepage
Fidel API "Offers as a Service": "the turnkey solution to launch, manage, and scale world-class card-linked offers" Not stated on its homepage Not on its homepage

Two things stand out. Kard is the only one of the three that says plainly, on the page we read, that merchants pay. Cardlytics frames its reach in US terms ("nationwide"), which tells a crypto card selling in Brazil, Germany or the Philippines a lot about where its merchant base sits.

Why issuers look for someone else to pay

Cashback has to come from somewhere, and for most cards that somewhere is interchange: the fee the merchant's side pays the issuer on each purchase.

Interchange is thin where crypto cards sell. In the European Economic Area, Regulation (EU) 2015/751 caps it at 0.20% of the transaction for consumer debit cards and 0.30% for consumer credit cards. In the US, Regulation II limits large issuers (banks with $10 billion or more in assets) to 21 cents plus 0.05% of the transaction, plus one cent for fraud prevention, according to Cooley's summary. A North Dakota court vacated that rule in August 2025 but stayed its own ruling pending appeal, so the cap still applies while the case continues.

Put a 1% cashback promise next to a 0.20% fee and the gap is obvious. Every dollar of cashback above the interchange line comes out of the program's margin, a membership fee, or a token budget. (The full arithmetic is in how crypto card cashback is funded.) That's the reason merchant-funded rewards exist, and it's the same reason crypto Card programs keep trimming their own cashback (we track the recent cuts in crypto card cashback rates compared).

Where merchant-funded offers fall short on a crypto card

Merchant-funded offers solve the cost problem. On a crypto card they leave three other problems open.

The merchants may be in the wrong places. Cardlytics measures its reach in US card swipes, and the other two don't publish where their merchants are. A crypto card's cardholders are spread across many countries. Before you sign, ask for the offer count in each of your top markets.

The funders don't want these people. A grocery chain pays for offers to win grocery shoppers. It has no particular reason to pay more for someone who holds stablecoins. The cardholder base is the crypto card's most valuable asset, and a retail offer network prices it like any other.

It doesn't earn on ordinary spend. Rent, utilities, a local café, a SaaS subscription: if the merchant isn't in the network, the purchase earns nothing. The cardholder sees cashback on some purchases and not others, and has to remember which.

None of this makes merchant-funded offers a bad product. It makes them a product designed for a different card.

Platform-funded cashback: the same idea, turned around

The funded model works when the funder wants the cardholder. For a crypto card, the businesses that want crypto card spenders most are crypto businesses: trading venues, prop firms and casinos. They already spend heavily on finding these people through affiliates and bonuses (see crypto exchange user acquisition beyond affiliates).

That changes three things in the model:

Merchant-funded rewards Platform-funded cashback
Who pays A merchant A crypto Platform (trading venue, prop firm, casino)
What earns Purchases at participating merchants Every settled card spend
Where it's paid To the card, as cashback Into the cardholder's account on that Platform, as the Platform's credit
Activation Often per offer None per offer; the cardholder claims when ready
What the funder buys A sale at its store A card spender with an account on its Platform
What it costs the issuer Nothing; it gets a share Nothing

The key difference is the second row. Because the funder is paying to acquire a customer rather than to discount a sale, it can afford to pay on spend anywhere, not just on spend with it. The catch sits in the third row: the cashback is credit on the Platform, not cash on the card. A cardholder who uses none of the Platforms gets nothing from it.

What to ask before you add any funded cashback

Whether the funder is a merchant or a Platform, the questions a Card program should ask are the same:

  • Who pays, and when? Get the funding mechanics in writing, including what happens to cashback that's earned and never claimed.
  • What do you have to build? One screen, an SDK, an offer feed, a support process?
  • Who handles failed claims? Wrong account details and disputes land somewhere. Make sure it isn't your support queue by default.
  • What do funders see about your cardholders? Card numbers and transaction histories should never leave your stack.
  • Can you choose the funders? You carry the brand and compliance exposure, so you should control which categories appear in your app.
  • Does it stack on your own cashback? Funded cashback should sit alongside anything you already pay, on a separate ledger.

Where Fanback fits

Fanback is Platform-funded cashback for crypto cards. Every settled card spend earns cashback from 10+ crypto Platforms, each claimable on its own Platform. As an example, $500 of settled spend at a 1% rate earns $5.00 on each Platform that's active for the cardholder, and the Card program's cashback expense stays at $0.00.

What it means in practice for a Card program:

  • The Platforms pay every dollar. Cashback is claimed into an account on the Platform. No money moves through your card.
  • You add one screen. The module shows a balance per Platform, claims and statuses, in your app and your brand, on our API.
  • We run the rest. Claims and checks are ours. Wrong usernames go back to the cardholder to fix.
  • Platforms see an account and an amount. No card details, no transactions.
  • It stacks on top of your own cashback.
  • Restricted countries are respected. A Platform shows as unavailable where it's restricted.

What it doesn't do: it isn't cash, and it isn't thousands of merchants. It's 10+ crypto Platforms. Choosing which Platforms and categories your cardholders see (casinos off, if you want) is on the page as coming, not live.

Frequently asked questions

What are merchant-funded rewards?

Merchant-funded rewards are cashback or discount offers paid for by the brand where the cardholder shops, not by the card issuer. The issuer distributes the offers in its app and receives a share of what the merchant pays. Kard's guide sums it up as "the merchant covers the reward."

How do card issuers make money from merchant-funded rewards?

The merchant pays the cashback plus a fee, and the issuer receives a share of that fee for providing the channel. None of the vendors we read publish the split. Ask for it in writing, along with how unclaimed cashback is handled.

What is the difference between merchant-funded and issuer-funded rewards?

Issuer-funded cashback is paid out of the issuer's own margin, usually interchange, which the EU caps at 0.20% on consumer debit cards. Merchant-funded cashback is paid by the brand, so the issuer's cost is zero. The trade-off is that it only earns at participating merchants.

Do card-linked offers need to be activated?

It depends on the network. Kard's guide says most card-linked offer software asks cardholders to click to activate each offer, while Kard also matches transactions automatically. Activation steps cut how many cardholders ever earn anything.

Can a crypto card offer cashback it doesn't fund?

Yes, if a third party pays for it. Merchant-funded offers are one route. Platform-funded cashback is the crypto version: trading venues and prop firms fund cashback on every settled spend, and cardholders claim it on each Platform.

The bottom line

Merchant-funded rewards proved that issuers will hand cashback costs to someone who wants their cardholders. They were built for US retail, though, and a crypto card's cardholders are worth most to crypto businesses, not supermarkets. The model worth copying is the funding, not the merchant list.

If you run a crypto Card program, the useful question isn't "which offer network?" It's "who already pays to reach my cardholders, and can they pay for my cashback instead?" For most crypto cards, the answer is the trading venues and prop firms your cardholders already use. That's where Fanback's Card program terms start.

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