Stablecoin payments

On Friday, the Visa share price dropped around 5% on the news that some US retailers, including Walmart, are exploring using stablecoins as a payment method. If you aren't familiar with the term, which my spell check isn't either, a stablecoin is a cryptocurrency that has its value pegged to another currency. Usually, it is 1 to 1 with the USD.

The fear is that stablecoins could create a rival payment option to the rails already created by Visa and Mastercard. Imagine paying for groceries, where the money leaves your crypto wallet, goes via a blockchain network and arrives in Walmart's crypto wallet. Something like this would be a huge win for retailers, assuming that it is instant and cheap.

Depending on the size of each retailer, swipe fees cost anywhere between 1% and 5% of the purchase value. Those costs add up quickly! It is worth noting that Visa's portion of those fees is very small. The bulk of the fees is paid to the card-issuing bank and the card machine provider.

Getting consumers to change their spending habits is very difficult. For stablecoin payments to work, people have to create new accounts, fund those accounts, and then remember to use them at checkout. Along the way, consumers will also be giving up some very juicy credit card rewards. Sounds messy and cumbersome for no upside.

If consumers really want to avoid established financial channels, Visa already has stablecoin/ blockchain networks in place. In our books, Visa is still the future of the payments industry.