Will Stablecoins Help Retailers Break The Visa–Mastercard Duopoly?

Forbes

2 days ago

BATH, UNITED KINGDOM - JANUARY 04: In this photo illustration the Visa, Mastercard and American ... More Express logo on various credit cards and debit cards are seen beside US one dollar bills on January 4, 2025 in Somerset, England. (Photo Illustration by)
Could stablecoins truly transform the way consumers make purchases? It is starting to appear that way. Stablecoins are coming forward as one of the most plausible crypto applications for real-world transactions, and several of the largest retailers globally, including Walmart (NYSE:WMT), are taking note. While credit and debit cards provide convenience and rewards for consumers, they also carry significant interchange fees for merchants – generally around 2% – and settlement periods that can extend over a few days. In contrast, stablecoins offer near-instantaneous settlement, reduced transaction expenses, and enhanced control over the payment experience. This positions them as a direct competitor to Visa (NYSE:V) and Mastercard's (NYSE:MA) fundamental business model.
What Are Stablecoins?
Stablecoins are a form of cryptocurrency created to maintain a stable value relative to government-issued currencies, like the U.S. dollar. Essentially, they bring the dollar onto the blockchain, merging the stability of a fiat currency with the speed, transparency, and programmability that cryptocurrencies provide. Stablecoins aren't simply a digital cash substitute. They are increasingly being positioned as a payment method, particularly after the recent approval of the new U.S. Stablecoin bill in the Senate last month. This legislation establishes guidelines for stablecoin issuance, including full reserve backing, mandatory monthly audits, and compliance with anti-money laundering regulations. These initiatives are anticipated to validate the asset class and encourage widespread acceptance. related: Are Stablecoins A Real Threat to Visa and Mastercard Stock?
How Will Retailers Use Stablecoins?
In theory, large retailers could either create their own dollar-backed stablecoins or utilize popular ones like USDC, establishing closed-loop ecosystems similar to in-store credit systems, yet supported by blockchain technology. For instance, customers might fund or receive cashback in these retailer-issued tokens. Merchants would gain from immediate settlement, decreased dependence on intermediaries, and significant savings on interchange fees. These fees have historically been a point of conflict between retailers and card networks.
Even if stablecoins are not widely adopted, they could act as a leverage point for retailers when negotiating with Visa and Mastercard to lower fees and enhance terms. Additionally, stablecoins could facilitate programmable rewards and adaptable discounts. For example, a retailer might automatically provide a specific cashback in tokens for repeat purchases or kick off limited-time discounts based on wallet transactions. Some initial actions are already evident. For instance, Shopify now enables merchants to accept stablecoins through integrations with Coinbase and Stripe. Reports indicate that Walmart and Amazon are considering launching their own dollar-backed stablecoins.
Will Customers Embrace Stablecoin?
Yet, adoption will not occur without challenges. Cards remain the top choice for most consumers. They are omnipresent, user-friendly, integrated with the existing banking system, and provide strong fraud protections and rewards. Meanwhile, utilizing stablecoins might necessitate customers to establish a separate crypto wallet, which could add additional steps to the checkout process. This could increase friction, making it a tough sell for many shoppers. Furthermore, the principal advantages of stablecoins, namely speed and cost, will primarily benefit merchants rather than consumers.
Retailers have previously attempted to shift away from cards with limited success. For example, pay-by-bank solutions, enabling customers to pay merchants directly from their bank accounts, have struggled to gain momentum in the U.S., even with cost advantages. Stablecoins could encounter similar obstacles. Moreover, Visa and Mastercard are investigating their own innovations in the stablecoin sector. Visa has already trialed settling transactions in USDC, and both networks are looking for methods to modernize cross-border payments utilizing blockchain-based solutions. In summary, these companies are aiming to position themselves as key players in stablecoin infrastructure, actively integrating them into their networks.
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