The payment industry "self-revolution"! Visa and Mastercard accelerate their layout of stablecoins

Visa and Mastercard are accelerating their embrace of cryptocurrency payments, betting on the growth potential of stablecoins in developing countries while fending off competitive threats from merchants bypassing their networks.

According to a report by The Information on Monday, the two payment giants have recently expanded their overseas cryptocurrency payment operations significantly and are actively seeking acquisition and investment opportunities. Mastercard is in talks to acquire Zerohash, which provides stablecoin payment infrastructure, for at least $1.5 billion. Visa invested in the UK stablecoin payment company BVNK in May and expressed a desire to invest in more stablecoin startups.

This wave of expansion was prompted by a wake-up call in the spring. Media reports indicated that Amazon and Walmart were exploring the launch of stablecoins at that time, causing Visa and Mastercard's stock prices to drop in response.

In July, Washington passed stablecoin legislation, providing legitimacy to the industry and driving its growth in traditional finance. Mark Nelsen, global product head of Visa's commercial and cash flow business, stated that the company had been waiting for the law to pass, "so most of the work was actually completed in the last two months."

Emerging Markets as Growth Engines

Visa's stablecoin-based prepaid card business is growing rapidly, with strong momentum in emerging markets like Latin America since its launch two years ago. In countries with unstable currencies, consumers and businesses use stablecoins to obtain dollars, and these prepaid cards allow people to easily hold and spend dollars.

For the quarter ending September 30, spending associated with Visa cards linked to stablecoins increased threefold compared to the same period last year, Visa CEO Ryan McInerney stated during last month's earnings call. Visa currently has over 130 stablecoin-linked card issuance projects in more than 40 countries, while Mastercard has over 100 crypto card projects globally.

Startups Rain, supported by Sapphire Ventures, and Bridge, a subsidiary of Stripe, are major card suppliers for the applications. Rain reported that its card's annualized spending amount has exceeded $2 billion, doubling since August. Argentine crypto app Lemon Cash claims that 70% of its users' total payment volume comes from Visa cards. Cuy Sheffield, head of Visa's crypto business, stated, "Five years from now, I believe this will become a very important product category for us."

Challenging the Role of Traditional Banks

The stablecoin business is quite delicate for Visa and Mastercard, as it may alienate banks, the traditional customers of debit and credit cards. Neither card company has issued its own stablecoin but instead helps banks launch stablecoins.

However, the promotion of stablecoin cards could pose a threat to banks, as their role in stablecoin-based transactions is diminished, and the revenue they earn is lower than that from traditional debit card payments. Merchants pay the same fees, but they prefer stablecoin transactions because funds are received faster James Wester, co-head of payment services at Javelin Strategy, stated that "the real importance of stablecoins for Visa and Mastercard lies in the fact that it changes the post-transaction settlement pipeline, rather than anything else," which is something consumers do not perceive. If more payments shift to stablecoins, it could impact the settlement processes traditionally completed through Fedwire, ACH transfers, or internal transfers.

Credit Cards Remain an Untapped Area

Direct payments between businesses and individuals remain the largest type of stablecoin transactions in the real world, followed by card payments. According to Artemis data, the involvement of Visa and Mastercard seems to drive card usage, while other attempts progress slowly.

In June of this year, Shopify launched a feature allowing some merchants to directly receive consumers' stablecoins using the Stripe payment platform and Coinbase blockchain. According to data from crypto data platform Dune, only 2,143 payments have been completed so far, totaling $305,402.

Stablecoin-linked credit cards are still in the early stages. Charlie Sandor, an investor at crypto venture fund CMT Digital, stated: "Stablecoins cannot really replace credit cards at this point, and that is the core business of Mastercard and Visa. Someone must be willing to extend you credit, and that functionality has not yet been built on-chain."