Visa And Mastercard Face Threat Of Erasure As Stablecoins Gain More Traction 

US businesses paid a staggering $187 billion in swipe fees, mostly driven by Mastercard and Visa cards. Stablecoins are now posing a threat to these traditional services, with their potential to reduce that toll or, better yet, defunct. 

Financial services companies like Mastercard and Visa view the increasing prominence of cryptocurrencies in the digital sphere as a threat to their market position. Mastercard and Visa have long dominated the digital payment services market, but with the face of the financial sector changing and becoming more tech-reliant, crypto and tech start-ups are becoming more actively involved in this field.  

The changes in the fintech industry are rapid and rampant, and long-established players are right to worry that their familiar playing field is undergoing immense change, and their positions are no longer secure if they are not fast to adapt and innovate. With stablecoins, which are a kind of cryptocurrency becoming a more popular option for digital payment, the credit and debit card issuers are competing with stablecoins’ lower fees and faster settlement. 

A stablecoin is a type of cryptocurrency which maintains a stable value, as it is often pegged to another currency, most commonly the US dollar. Stablecoins can also be pegged to other commodities like gold or other cryptocurrencies. As these digital currencies are attached to an external value, they are less volatile, making them more preferred than other cryptos to carry out digital transactions. 

While crypto enthusiasts are looking forward to the regularisation of these digital currencies, replacing credit or debit cards with these assets has been dubbed a technological and financial threat. This is because of a lack of proper regulation. Digital tokens can be used to make transactions directly from the users’ crypto wallets, bypassing the need to route these payments through a bank or card network. 

As crypto-friendly infrastructure is still in its nascent stage, substituting it for mainstream transaction options always carries a risk which remains unaccounted for. In 2024, US businesses paid a staggering $187 billion in swipe fees, mostly driven by Mastercard and Visa cards. Stablecoins are now posing a threat to these traditional services, with their potential to reduce that toll or, better yet, defunct. 

Transaction costs are soaring, costing retailers hundreds of billions globally. Hence, even a minute shift towards stablecoins could heavily alter the financial landscape. Currently valued at $253 billion, stablecoins have the potential to hit $2 trillion within years, estimates US Treasury Secretary Scott Bessent. 

However, card issuers are wasting no time in jumping onto the bandwagon. Visa is already piloting stablecoin settlement directly on its network, allowing banks to issue these tokens. Mastercard has partnered with Paxos to issue its own fiat-backed stablecoin, USDG, and is working out infrastructure to support both crypto and traditional currencies. 

The biggest advantage these established brands have is the trust of their customers. As cryptocurrency is yet to be brought into the mainstream and is still viewed with scepticism, customers are more likely to opt for services offered by these companies as they already have an international presence, fraud protection systems, and tokenisation technologies, as opposed to their newly emerging fintech rivals. 

Visa and Mastercard are not the only ones entering the stablecoin race. The Wall Street Journal reported that Walmart and Amazon are among the numerous multinational companies exploring the issuance of their own stablecoins. In the past, retailers have tried with little success to launch their card payment systems. But the dominance of Visa and Mastercard dampened its popularity. 

Crypto is emerging as the first real threat to traditional financial payment services. This, coupled with US President Donald Trump’s enthusiasm for cryptocurrencies, has triggered these companies to adopt more tokenised digital currencies into their services. Trump is also set to sign a bill formalising oversight of stablecoin issuers, giving the cryptocurrency industry a larger boost. The financial world is witnessing the slow normalisation of crypto, and traditional financial services will be left with no choice but to adapt and grow.