Paper & Blocks

Crypto digital banking firm Juno has raised $18 million in a Series A funding round to expand products and operations and launch its first tokenized loyalty program…

  -CoinDesk

This is eye catching. Juno, for all intents and purposes, is the world’s most crypto-friendly checking account. Backed by Evolve Bank & Trust, like a traditional bank you can set-up direct deposit, have your paycheck deposited and held in Juno, and take advantage of the typical checking account payment amenities (debit card, ACH, Wires, and ATM access). But wait… there’s more. Juno also offers customers easy options to purchase crypto, have their paycheck deposited in crypto, and even offramp their crypto to multiple chains including Arbitrum One, Polygon and Optimism (for ETH and USDC, for the time being).

But the idea that really stands out is the recent launch of JCOIN, Juno’s loyalty token to anchor their rewards program:

As part of the fundraising, Juno is introducing a loyalty token, Juno coin (JCOIN), which will only be distributed to verified account holders. The loyalty program will be similar to traditional credit card rewards points. Juno members can earn JCOIN for (1) taking their paychecks in crypto, or (2) spending crypto with their Juno debit card.

In doing so, the company is remixing three insights from the traditional financial services domain into something new for the Web3 world. Those insights are:

• Checking accounts continue to be the hub at the center of most people’s financial lives. While becoming ‘bankless’ has become a noble goal for some in crypto, today’s realities still require even the most degen degens to operate on top of traditional financial rails in their everyday life. The checking account as a widely used product base is not going anywhere.
• Loyalty and rewards programs have been a material amplifier for card-based payments. No vertical in financial services has created more powerful incentive structures than those found in the credit card domain. Travel, cashback, exclusive access to deals and events… they can all be yours for the low low price of your annual interchange revenue.
• Speculation is a powerful force driving most of the activity in the self-directed investment [online brokerage] industry today. Hard to debate after the rise of Robinhooders, Wall Street Bettors and the growing cadre of retail trading options across America over the past several years. For the same reason people like to buy lottery tickets, people like to speculate because it gives them a potential path to a better future and the online brokerage industry reaped those benefits through the first two years of the pandemic.

There is a formula here:

Product Base x Rewards Incentive Structure x A Potential Path to a Better Future = A Business Model at the Intersection of Crypto and Traditional Products

Let’s break those down one at a time.

Product Base: More specifically, this is a non-crypto product base that already has widespread adoption and a common set of existing consumer behaviours. In fact, the more widespread the product base (offering reach) and the more established pattern of behaviour around it (requiring little to no new learned behaviour) the more likely the chances of this formula finding some success. The choice of a checking account is a good example. The majority of people have one and there is a well-established pattern of behaviours around it from paying bills to swiping a debit card.

Rewards Incentive Structure: Specifically, a mechanism to reward specific behaviours on a platform. Credit card rewards programs are structured to encourage as much spend as possible while capturing first-card position in your wallet. For this formula to work out, there must be a targeted business-critical customer behaviour that can be incentivized, and in doing so, creates a positive outcome for both the business and the customer. Encouraging a checking account customer to direct deposit their paycheck, for example, is an action that benefits both the business (who gets more spread and interchange revenue) and for the customer (who gets rewarded in the form of the incentive when they otherwise would not). A step further are situations with pure incentive alignment, where the better the customer does, the better the business does, and vice versa.

A Potential Path to a Better Future: This is simply a feeling, but a powerful one at that. In fact, it is crypto’s superpower, which is an incentive structure that embeds both community access and a potential path to a better future. The power of crypto’s incentive structures have bootstrapped networks like Helium into existence, formed media brands like BAYC seemingly out of thin air, and created DeFi booms and busts through an explosion of liquidity mining and yield farming. What makes crypto so powerful is that it does not just incentivize with static dollars, it boosts those dollars with the sweet smell of upside potential. For Juno, it’s as if your airline rewards suddenly became liquid, tradable and composable, and thereby could be used for speculation in the open market. Not to mention, these rewards also grant you access into the crypto community, and in Juno’s case, access to specific partner offers. It is traditional rewards programs on steroids!

To finish off the example, it is clear Juno’s business model is following this formula:

• Product Base: Checking Account, but with crypto friendly features
• Rewards Incentive Structure: Tokenized loyalty program where users can be rewarded for performing two core actions on the platform: receiving direct deposits and spending with their debit card.
• A Potential Path to a Better Future: JCOIN, which comes with all of the speculative potential held in most tokens today.

While I think I’m doing a great job at selling Juno, this isn’t a paid advertisement. Juno has tapped into a pattern expressed through the formula above that showcases crypto’s superpower, specifically through rewards, which is its ability to incentivize action:

• Money-based rewards are a powerful incentive on its own, which is why cashback programs on credit cards done so well.
• Money-based rewards that can appreciate over time do even better, which is why bitcoin-based rewards programs like Coinmiles have done well.
• Money-based rewards that can appreciate over time AND get you access into a community is perhaps the most powerful combination of incentives found in the financial world today.

Business models with this embedded superpower will not go unnoticed. This is a model that other firms have (and will continue to) follow. In particular, these incentive superpowers showcased by Juno are being embedded in many other Web3 business models.

To offer up a few examples:

Brave

Brave is a free and open-source web browser based on Google Chrome. Being a web browser, it has a product base that is widely used and has an established pattern of customer behaviour. Brave has added some differentiating features, like privacy enhancements that block online advertisements and website trackers. Most apt for this discussion though, is Brave’s rewards incentive structure which allows users the choice to turn on ads, and for those that do, reward them for their attention with Basic Attention Token (BAT). In short, Brave saves its users from third-party platforms that seek to monetize their attention and offers them an opportunity to monetize it themselves. This is personal data defense at its best.

Carrying on, BAT, like other crypto tokens, has the ability to appreciate with the market (the Potential Path to a Better Future). Aside from their browser and rewards program, Brave has a lot of other stuff going on that I’ve glossed over that can be read about here.

Delphia

Toronto-based Delphia is another solid example. Delphia is a mobile investment platform, somewhat akin to an automated investment service (aka, robo-advisor), but with an investment edge. The firm creates its edge by analyzing the personal data shared by its members to make more informed investment decisions. Whereas Brave helps users play ‘personal data defense’, Delphia offers its customers a way to go on offense with their personal data, contributing it to the community to be used as an alpha-generating investment edge in the markets.

Back to the formula, the firm leverages automated investment management as the product base, a sub-set of the wealth management industry in the U.S. with well over $400 billion in assets under administration spread across millions of accounts. The firm announced a soon-to-be-launched native rewards token (PHI) as part of its rewards incentive structure to compensate users for their data contributions and grant them access to the benefits of the Delphia community. Being part of that community and investing assets with Delphia is what offers users a potential path to a better future.

Summary

This is one of the many reasons Web3 has a lot of excitement: because it allows people to be able to take control of their own data. They can play defense, like Brave, against platforms that are already making money off them. Or they can play offense, like Delphia, by leveraging their own data as an asset. None of this is possible (or at least becomes much more difficult) without the crypto reward underpinnings. The incentives that are powered by community access and speculative potential are hard to ignore, which is why we’ll likely see rewards-based tokens find more widely used product bases to attach to in the not-too-distant future.