Crypto Dreams vs. Payment Reality: The Visa Mastercard Advantage

Why retail usage of stablecoins face an uphill battle

Visa and Mastercard faced two new headline risks within the last week.

First, rumors emerged that Walmart and Amazon were considering launching their own stablecoins.

Second, the U.S. Senate passed the GENIUS Act, though it still requires House approval and the President's signature.

Walmart Coin

But why would these retail giants want their own stablecoins?

The Bank Holding Company Act of 1956 may pose regulatory hurdles to such an initiative.

Even if legally possible, launching stablecoins would subject these companies to new regulatory oversight. While stablecoins face lighter regulation than traditional banking, both retailers would need to invest in regulatory compliance teams and secure infrastructure.

A potential run on their stablecoins could also threaten their core business operations.

The primary motivation is simple: reducing transaction fees.

For discount retailers, every penny saved per transaction boosts profit margins. At their massive scale, even small margin improvements translate to hundreds of millions in earnings.

For example, Walmart's operating margin of 4.65% would yield an additional $579.6 million in profit if increased to 5%.

This explains why Walmart and Amazon consistently push back against card networks' interchange fees.

This stablecoin rumor is merely their latest salvo in their waar against interchange fees.

Consumer Behavior

Stablecoin adoption requires a fundamental shift in consumer behavior. Consumers have strong inertia around their current payment methods, making change difficult.

Visa and Mastercard have invested decades in building consumer trust and establishing credit and debit cards as the default payment choice.

Traditional cards also offer important consumer protections. When fraud occurs, cardholders have clear paths to recover their money. It's unclear whether stablecoin transactions would offer similar safeguards.

Adopting stablecoins demands that consumers learn to use crypto accounts, digital wallets, and cryptocurrency transactions. This is a significant learning curve.

Without compelling incentives like the rewards and cashback that credit cards offer, or the protection cards provide, why would consumers switch to stablecoins?

Consumer switching costs are too high.

Recreating the Network