digital assets

Exclusive: Bakkt Releases Digital Wallet App

Trading fiat currency for crypto—or frequent flier miles for lattes
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· 4 min read

Today, Bakkt is announcing the general availability of its digital wallet app, which is rolling out with merchant partners including Starbucks and Best Buy. During a five-month, invite-only beta run, the app racked up 500,000+ users.

Bakkt bills its app as a wallet for cryptocurrencies and siloed digital assets that don’t run on a blockchain. Including the latter—loyalty points, airline miles, gift cards, in-game assets—is how the company hopes Bakkt App will stand out. Popular crypto wallets don't typically allow users to unite crypto and non-crypto digital assets.

“We want to expand access to the growing digital assets economy,” Bakkt CEO Gavin Michael, a former Citi and Chase exec, tells the Brew. His crypto-focused company is a subsidiary of Intercontinental Exchange, parent to the 228-year-old New York Stock Exchange.

Bakkt estimates that $1.25+ trillion is tied up in crypto, rewards, loyalty points, gaming assets, and merchant stored value (i.e. your Starbucks app).

The company wants to reduce the friction of owning and using those assets by aggregating them in one place and offering more liquidity to users. You can store the assets, convert them into fiat/crypto, or send them to other users.

  • Some Bakkt App features are standard fare among competing wallets: Payment processing, a simple end-to-end interface, crypto educational materials, bank account linking, and know-your-customer (KYC) checks.

Price discovery

Over the last year, this writer has accumulated an abundance of one asset that seemed to depreciate more than most: airline miles. We’d wager that in 2020, they’d fetch pennies on the dollar if you tried exchanging them for cash.

So how does Bakkt set a conversion rate for these intangible assets?

Michael’s answer was a cross between—we’re paraphrasing—it’s proprietary, and, “we work with partners.” One thing we do know: Assets are initially converted into fiat when traded on the platform. Bakkt uses “US currency because that’s how merchants settle and clear today.”

Ultimately, the company hopes to build functionality that allows for direct transfers between other asset pairings on its app.

Swapping frequent flier miles for lattes

The business-to-business pitch is to “deepen customer engagement and lower payment costs.” Michael says Bakkt has “a large pipeline of partners who are ready to come onto the platform.”

To start, five are already on board:

  • Bakkt has paired up with Starbucks and already integrated with its mobile app.
  • Best Buy plans to offer exclusive deals to Bakkt wallet users.
  • Michael said his company’s partnership with Fiserv, a Fortune 500 fintech, “is allowing us to reach 600 credit unions.”
  • Bakkt also has special arrangements with GolfNow, a tee-time marketplace with 3.5 million users, and Choice Hotels, a hospitality chain.
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What’s the basic logic behind these partnerships? An example: At the end of 2019, Starbucks had nearly $1.6 billion stored on gift cards and mobile balances. If you’re Starbucks, why remind customers of that? Why not pocket funds if a card goes unredeemed or a caffeine habit forsworn?

Michael doesn’t speak for Starbucks, but he said the partnership “is about creating a new payment option.”

Bakkt users could trade in frequent flier miles to reload their Starbucks balance. And since Millennials buy lattes daily instead of saving for a home, it seems like a good bet for the coffee giant.

On a longer horizon than the coming weeks, Bakkt and Microsoft are “very much thinking about how we start to disrupt around in-game assets,” Michael says. “You can expect to see more coming with that over time.”

  • Consider this your friendly reminder that billions’ worth of currency, avatars, weapons, and other goods are exchanged each year in video games’ virtual economies.

Back to Bakkt’s roots

Though it’s now crossing the consumer Rubicon, Bakkt’s first offerings were crypto custody services and a bitcoin futures market for institutions. Michael says Bakkt will use the latter to forecast the price of BTC and “to adjust and transfer in and out of fiat.”

The clearinghouse comparison comes naturally, given Bakkt’s owner and NYSE sibling. “We have a platform that is built to handle these assets natively,” Michael said. “It has control, regulation, and compliance in its core…[and] it’s underpinned by institutional-grade technology.”

Big picture: The Bakkt App could become a popular digital wallet...or a phantom clearinghouse for digital detritus we rack up and forget. Over the long run, the outcome may be determined by what partners and asset classes Bakkt brings into the ecosystem.

Keep up with the innovative tech transforming business

Tech Brew keeps business leaders up-to-date on the latest innovations, automation advances, policy shifts, and more, so they can make informed decisions about tech.