Author: Long Yue Source: Wall Street Journal
Summary
Stablecoins are expected to help retailers such as Walmart and Amazon bypass traditional payment networks and save billions of dollars in fees; at the same time, they can achieve instant settlement of funds, while traditional credit card transactions have to wait for several days. Faced with threats, traditional payment providers such as Visa and Mastercard are trying to position themselves as key infrastructure providers for the stablecoin ecosystem. For consumers, analysts say that "prices and settlement times are indeed beneficial to merchants, but they don't mean much to consumers."
Retail giants such as Walmart and Amazon are quietly laying out the stablecoin payment map. This financial experiment that seems to be a technological innovation is actually a direct declaration of war against traditional payment overlords such as Visa and Mastercard. Billions of dollars in fees each year have finally forced these retail giants to seek solutions that completely subvert the existing rules of the game.
Wall Street News previously mentioned that multinational giants such as Walmart and Amazon have recently begun to explore the possibility of issuing their own stablecoins in the United States. Online travel giant Expedia and other large companies, including airlines, are also discussing plans to issue stablecoins.
Bloomberg's latest analysis pointed out that the motivation for these companies to issue stablecoins is not to embrace cryptocurrency innovation, but to gain new bargaining chips in the long-standing fee dispute with Visa and MasterCard, or even to bypass the traditional payment network completely. Every year, these retailers pay billions of dollars in fees in traditional payment systems, including interchange fees generated when customers use bank cards to shop. Even more frustrating is that payment settlements often take several days, delaying the time for merchants to receive sales revenue.
And stablecoins offer the attractive prospect of instant settlement-funds do not need to wait for several days to arrive like traditional credit card transactions. More importantly, this may help them get rid of the dilemma of paying high processing fees to banks and payment networks.
Doug Kantor, general counsel of the National Association of Convenience Stores, put it bluntly:
The reason fees are so high is that Visa and MasterCard have organized banks across the country into a textbook case of a price-setting cartel, telling the banks how much to charge merchants. The result is that all these banks, which are supposed to compete with each other, are not competing in terms of charging merchants for swipe cards.
Retail giants try to bypass traditional payment networks
Retail giants have long tried to launch payment alternatives to bypass the card-based system dominated by Visa and MasterCard.
Walmart has been a leader in pay-by-bank, which allows consumers to pay merchants directly from their bank accounts without using credit or debit cards. Last year, Walmart announced an upgraded version of its pay-by-bank service.
The Wall Street Journal article mentioned that Walmart also lobbied to add a separate amendment to the GENIUS Act to introduce more competition in the credit card industry. The company has long sought to enter the financial services sector, hoping to take advantage of its network of millions of weekly customers and employees.
Amazon's related efforts are still in the early stages, and some discussions focus on launching the company's own tokens for online shopping. Even if they decide not to issue their own stablecoins, these companies are weighing how to use external stablecoins, such as through a merchant alliance led by a stablecoin issuer.
As the Trump administration relaxes cryptocurrency regulation and promotes the GENIUS Act to establish a regulatory framework for stablecoins, stablecoins are facing unprecedented development opportunities.
The commercial trade organization led by the Merchant Payment Alliance has been in talks with U.S. legislatures in recent months to promote the passage of the GENIUS Act. The trade groups said a regulatory framework for stablecoins would provide merchants with an alternative payment method that could significantly reduce their fees and create competition for Visa and Mastercard.
Traditional payment networks fight back
Faced with potential threats, traditional payment providers such as Visa and Mastercard are not sitting still. The two companies are trying to position themselves as key infrastructure providers for the stablecoin ecosystem.
Last year, Visa announced the launch of a platform to help banks issue their own fiat-backed tokens. Recently, the network also partnered with Stripe's Bridge division to allow businesses to launch credit cards associated with stablecoins. Mastercard, for its part, has added stablecoin settlement support for merchants.
"Unlocking this potential is critical to how we respond to a rapidly changing world, giving people and businesses the freedom they want by providing the choices they deserve," said Jorn Lambert, chief product officer at Mastercard, in a statement last month.
At the same time, other players in the payment ecosystem are also accelerating their layout. Shopify announced this week that it will allow merchants on its platform to accept stablecoin payments, a service supported by Stripe and Coinbase.
The real challenge of consumer acceptance
While stablecoins offer significant advantages to merchants, convincing consumers to abandon the credit cards they are accustomed to using is another matter. “Price and settlement time are really good for merchants, but they don’t mean much to consumers,” said Sanjay Sakhrani, managing director and senior analyst at Keefe, Bruyette & Woods.
Stablecoins also require consumers to have a cryptocurrency wallet, usually set up through a third-party platform such as MetaMask or Coinbase Wallet, which adds friction to the purchasing experience. More importantly, consumers need to see clear advantages over traditional credit cards, especially if the credit product offers reward points.
PayPal is trying to solve some of the use case problems by building a platform that helps merchants pay overseas suppliers with stablecoins.
However, history shows that this is not an easy path to take. The promotion of bank direct payments in the United States has been slow, leaving many failures. For example, the Merchant Customer Exchange (MCX) system, which is backed by a coalition of U.S. retailers including Walmart and Target, did not gain widespread adoption until it was acquired by JPMorgan Chase nearly a decade ago.
Scott Talbott, executive vice president of the Electronic Transactions Association, warned: "Any new system will have its challenges, risks and costs, and stablecoins will be affected by these same forces."