Joseph

Building loyalty systems

[Joseph @JosephALChami]

In early 2024, a new blockchain launched their quest system.
1.2M users showed up. 80M quests were completed.
It looked successful...
Until 93.5% of users vanished after the airdrop with a negative retention rate: -0.183%
But after adding token rewards, RR rose slightly to 0.59% (still very low).

What’s behind this user behaviour?

Our research paper, accepted at FC workshop, is the first to deeply analyze onchain quests and loyalty, aiming to answer exactly that.

[Joseph @JosephALChami]

@sh1sh1nk a startup saying V1=vision, v2= data, v3=business model.
we are now at v3 stage and many decided to deprioritize v1's decentralized vision for an effective business model

[Joseph @JosephALChami]

@AlanaDLevin the button with the highest dopamine hit

[Joseph @JosephALChami]

"go do something great and your network will instantly emerge." @naval

[Beff (e/acc) @beffjezos]

The absolute level of locked in game 7 focus vibes Ashton is giving off trying to get @steipete to sign his VC term sheet rn is next level

[Joseph @JosephALChami]

We can just stop calling it crypto for now.
AI researchers did the same for decades when they were kicked out of the room for saying AI

[Linda Xie @lindaxie]

Regardless of how I feel about it, I've never had so many people I respect tell me I should leave crypto

[Joseph @JosephALChami]

@0xave that's great. I think a TIP403-like but for agents spending + personal local agents for trust/data would be awesome

[mert @mert]

AI is many decades old

crypto is 2 decades old, and scalable chains aren't even 5 years old

cynicism towards crypto is a lack of imagination exacerbated by price-driven emotion

we will separate money from the state, encrypt it, and make it programmable at planetary scale

[Joseph @JosephALChami]

@jessepollak too much left to build

[Joseph @JosephALChami]

@XCreators congrats to @Pumpfun for winning $1M

[Joseph @JosephALChami]

@ccatalini basically all crypto cards will either go out of business or get acquired, unless they get a direct license instead of renting it from an Issuer

[Joseph @JosephALChami]

@ProductHunt until you're bankrupted by claude

[Joseph @JosephALChami]

@grok what is the "Reverse Robin Hood" mechanism?

[Joseph @JosephALChami]

A great goal for stablecoin payments would be to reverse the "Reverse Robin Hood" mechanism

[Joseph @JosephALChami]

@vnstr_onchain @wcthub thx for sharing. can't wait

[Joseph @JosephALChami]

Source: https://t.co/9sEw5tktTx

[Joseph @JosephALChami]

Bank reward cards are a masterclass in financial psyops.

It's more like CashGone + debt.

~60% of cardholders lose money monthly holding that plastic card.

[Joseph @JosephALChami]

@kyleArojas @ethereumfndn 💥

[Joseph @JosephALChami]

Painfully accurate. Crypto is now just an API call.

But banks should be threatened by crypto, for its technical AND economic unlocks, as long as merchants are still paying to participate.

Why do we need to pay a middleman 3% when money itself is programmable?

[Jess Houlgrave @Houlgrave]

https://t.co/lgzJrqO9KN

[Joseph @JosephALChami]

The Reverse Robin Hood Hypothesis

"Naïve consumers also follow a sub-optimal balance-matching heuristic when repaying their credit cards, incurring higher costs. Banks incentivize the use of reward cards by offering lower interest rates than on comparable cards without rewards. We estimate an aggregate annual redistribution of $15 billion from less to more educated, poorer to richer, and high to low minority areas, widening existing disparities."

[Amanda Orson @amandaorson]

Your credit card rewards exist because someone else is paying 25% APR. Cap that at 10% and the points don’t survive.

I spent years working inside fintech and card programs. That interest margin is the invisible buffer that makes rewards, lounges, and credits pencil out.

Capping credit card APRs at 10% sounds like an obvious consumer win. Cards charge 20 to 30%, many consumers revolve balances, and the system feels punitive.

But credit card economics are not just about interest rates. They are a cross-subsidized system where revolvers subsidize transactors, rewards rely on behavioral inefficiency, and risk-based pricing subsidizes access.

Remove one leg of that stool and the system does not become fairer; it rebalances. And the costs show up where consumers notice most.

Lets look at how this would impact 3 programs

1. AMEX Platinum

A 10% credit card APR cap would not make your card cheaper or better. You would still have access, but you would almost certainly get less value for the same or higher price.

The Platinum brand survives because its customers are affluent, pay in full, and tolerate high annual fees. What quietly supports that ecosystem is portfolio-level profitability, which allows AMEX to tolerate loss, overuse, and inefficiency in premium benefits.

When that margin shrinks, the cost shows up directly in your (lesser) benefits.

In a world where:
- Rewards economics tighten
- Devaluations become more likely
- Flexibility is reduced

Points become a liability to the issuer, and liabilities get repriced.

So what this likely means for you as a Platinum cardholder:
- Lounges do not expand to fix crowding. Instead, access tightens or amenities are reduced.
- Statement credits become harder to use, more fragmented, or less generous.
- Annual fees go up
- New approvals become more selective, even for high earners.

Your card still works, but the value proposition shifts. Platinum becomes more explicitly pay-to-play, with fewer hidden subsidies propping up premium perks.

You pay the same or more, and you get a little less in return.

Which is why some people are already warning that points devaluations become more likely in this environment (like @BowTiedBull this morning saying "Dump ALL your credit card points. All of them.")

2. Bilt Card

This program is the canary in the coal mine for what to expect.

Bilt’s super popular rent rewards worked because Wells Fargo was willing to subsidize them. The card offered 1 point per dollar on rent with no fees because Wells Fargo paid Bilt roughly 0.8 percent (80 bps) of each rent payment to fund rewards... despite earning little or no interchange on those transactions.

But that is some actuarial level math with a number of variables at risk that proved wrong/ unsustainable.

Wells Fargo was getting hosed $10 million a month on the program, so they exited the partnership years before the original end date and forced Bilt to restructure its rewards with a different bank

What does that teach us?

- When interest and interchange margins shrink, banks stop tolerating loss-leading reward programs.
- Interest income does not fund every reward directly, but it provides the buffer that allows experiments like Bilt to exist at all.
- Remove that buffer and rewards must be paid for explicitly.

Bilt’s shift to a three-tier lineup with annual fees is not an anomaly. It is the direction rewards go when credit stops quietly absorbing losses.

Pay-to-play rewards.

What feels like consumer protection will shows up as fewer perks, pay-to-play rewards, and less room for innovation.

3. Credit One & other Subprime Cards

Now the least glamorous corner.

Subprime cards get criticized for high APRs, annual fees, low limits, minimal rewards. But they exist for a reason.

They serve thin-file borrowers, damaged credit, people shut out of conventional loans, households using cards for liquidity not perks... but they charge high APRs because charge-offs exceed 8-10%, fraud and servicing costs are higher, and credit limits are small while fixed costs remain significant.

A 10% cap makes these products mathematically impossible.

These cards don't become cheaper. They cease to exist.

As @sytaylor noted this morning - "You realize this will push many more customers towards loan sharks?"

The demand for credit doesn't disappear... it migrates to BNPL with opaque effective APRs, chronic overdraft usage, fee-heavy installment loans, and less regulated lenders like loan sharks/ payday loans.

So who WOULD win? Debit-First Fintechs

One of the least discussed consequences: where would reward customers migrate?

I think 1% cashback programs are an obvious winner. Chime, Varo, Current and niche cards like Greenlight and Privacy.

(If you have not worked in a fintech or a bank you probably don't know what the Durbin Amedment is - but the TL;DR is that very large banks (BoA, Wells, JPMC) have capped interchange rates of around 27 bps on debit swipes.

Small banks with < $10B AUM, however, do not - they can earn 1-2% on interchange (avg was 160 bps or so last I checked).

Which is why all of the debit card fintech companies you've heard of are partnered with these smaller banks - they can offer rewards like 1% cashback programs and still have margin sufficient to build a business around.)

In a world where credit rewards shrink, access tightens, and annual fees rise, debit-based fintechs look better by comparison.

But consumers lose: credit protections, payment float, stronger dispute rights, credit-building opportunities.

TL;DR

An APR cap feels like consumer protection.

In practice it reshapes the market in ways that are easy to miss:
- It will shrink access to credit
- Eliminate rewards programs that aren't tied to high annual fees
- Force risk into less regulated channels
- Unintentionally advantages debit over credit
- Help affluent transactors more than vulnerable borrowers

Credit doesn't become cheaper. It becomes scarcer, less flexible, less transparent.

But banks will adapt.
Fintechs will adapt.

Consumers caught in the middle do not get protected.
They get fewer choices, worse products, and priced out.

[Joseph @JosephALChami]

@epicenterbtc @Kevihaiceth @zcabrams @Stablecoin @tw_tter @stripe Not fair to compare them. MC volume is payments while $32 trillion is mostly high-frequency trading/bots.
"roughly 99% represents effective cash holdings in digital asset trading accounts, rather than transactions in which a stablecoin is used to pay for a good or service."