Cashback App
How the Card Side Works
1. Unique Growing Spending Limit Model
Our platform stands distinctively apart from other cashback programs, courtesy of our innovative " Growing Spending Limit" model. Every buyer is assigned a spending limit, which constitutes the maximum amount they can expend to be eligible for cashback rewards. This spending Limit will increase every day by a fixed certain amount for all default accounts, we call this the "daily allowance". The spending Limit will grow by the rate of the daily allowance everyday, and any purchases made will be deducted from the spending limit .
Should a buyer's expenditure surpass the spending limit, the excess amount will not be eligible for cashback rewards and will be treated as a standard payment without cashback benefits. For instance, if a user has a spending limit of £3000 and their daily allowance is £35, Then provided that they didnt spend anything that day, the spending limit would increase to £35, so the spending limit would be £3035. Now the user spends £3100 in a shop. £3035 of the transactions in the shop will recieve a cashback of 15%, no matter what the purchase is, but the excess £65 spent on top of the spending limit will receive no cashback benefit. So altogether the user will earn a cashback of: £3035 * 0.15 = £455.25, so altogether we would make a cashback on the £3100, a cashback of £455.25, but you have a spending limit now of £3035, and you will need to wait for it to increase again by £35 per day.
2. Calculation of the Daily Allowance Model
Bound Finance operates on a unique spending limit model where users' daily spending allowance grows by a set amount, for instance, $50 each day. This allowance accumulates indefinitely, so if a user abstains from spending for a week, their limit reaches $350. Upon making a purchase, the cost is subtracted from this accumulated limit, and users receive a default cashback of 12%.
The daily rate which spending limit increases by in the cashback app is determined through the following formula:
This model is significant as it enables the protocol to generate enough yield via yield bearing assets / LSDFi Stablecoins to cover any cashback for the user's transaction.
Example
if a user has a daily allowance of £35 and abstains from spending for an entire year, they could accumulate £12,775 spending limit for cashback-eligible transactions. Suppose the user then spends £5,000 on a luxury item and receives a 15% cashback, or £750. They would then have £7,775 left in their spending limit. To recover their original allowance amount, they would need to accumulate their daily allowance of £35 until it is fully replenished, so in this example 142 days to go back to £12,775 (5000 / 35 = 142 days).
The reasoning behind this approach is that while the user was not utilising their allowance, the protocol was generating rewards by using the $eUSD backing $BCK In the crypto side. After a year, the protocol would have accrued enough $eUSD to cover the cashback value for a transaction amounting to £5,000.
4. Cashback Distribution and Mechanism
Bound Finance follows a buyer-centric approach, where cashback rewards play a crucial role. Cashback rewards are distributed in the form of stablecoins e.g USDC, peUSD, or $eUSD ensuring that the cashback amounts remain constant, irrespective of the volatility in the crypto markets.
5. Buffer Period and Potential Savings
To account for potential returns or refunds, we provide a 14-day buffer period before calculating the total transaction amount eligible for cashback. The integration with the Plaid API enables real-time transaction data monitoring, ensuring that returns are considered before finalising the cashback amount.
6. Tracking Transactions, Cashback Calculation, and Integration with Plaid API
We have integrated our cashback application with any credit or debit card using the Plaid API, which enables seamless tracking of all transactions. Plaid is a widely used platform within the fintech industry and is compatible with most major banks. It has undergone rigorous security audits and is trusted among traditional finance users, ensuring a frictionless onboarding process on our app.
By leveraging the Plaid API, we can monitor real-time transaction data and accurately calculate the cashback amount for each user.
Additionally, this integration allows us to offer a double-dipping opportunity for savings. If a product or service already has a promotional offer or discount, our cashback can be applied in conjunction with it, or if a user connects their American Express card, they can experience both American Expresses' rewards as well as experiencing ~15% cashback across all purchases, leading to further savings. This strategy is designed to maximise the benefits and stretch the purchasing power of our users' money.
Last updated
