With retail giants Amazon and Walmart reportedly planning to issue their stablecoins, shares of payment companies plunged on Friday, fearing the move would cause losses in payment revenue for the latter.
However, analysts are saying the reaction was too hasty and the transition to stablecoin is not as easy as it seems.
The plunge
A WSJ report on Friday said that Amazon and Walmart are looking to issue their stablecoins to accelerate payment processing and save potentially billions in transaction fees.
Before that, Shopify said it will allow payments in USDC, a stablecoin issued by Circle.
After the news broke out, Visa shares fell 5% and Mastercard fell around 4%.
American Express, Capital One, and PayPal also fell in the session.
However, most of these shares recovered on Monday.
Credit and debit cards’ deeper integration
Wells Fargo analyst Donald Fandetti said he sees hurdles to the theoretical alternative to credit card payments.
He compares the stablecoin payment to pay-by-bank or account-to-account payments, which are available in the US but not widely adopted.
According to Fandetti, stablecoins will likely be used for cross-border B2B payments, rather than an alternative to cards.
He cites the debit cards being cheaper after interchange and the need to provide a value proposition to replace credit cards.
Bernstein analyst Harshita Rawat pointed out that Walmart has a history of pushing the bounds of fintech, and these companies looking for alternative payment methods is not new.
She added that it will take years for this payment system to take traction, and its application will be limited to cross-border usage or in developing countries that have volatile underlying currencies.
Rawat argues that stablecoin payments will have more application in instances like “in less liquid remittances corridors, cross-border business-to-business and treasury/cash management”, rather than retail consumer to business payments.
Rawat also mentioned that PayPal had launched in 2023, and despite the company’s 400 million users and 30 million merchants, the PayPal USD (PYUSD) had limited traction.
The analyst added that it failed due to a lack of a crypto flywheel, limited push by the company until recently, and a lack of demand.
Political risks still linger
Even though the US Senate is set to vote for the GENIUS Act, the bill to regulate stablecoins, there is no guarantee that retailers will be able to issue a stablecoin, warns analysts.
TD Cowen’s Jaret Seiberg said, “We question if the government ultimately will permit commercial firms to issue stablecoins that can be broadly used to make payments”.
Seiberg noted that even if the GENIUS Act allows firms to issue stablecoins, there will be backlash for permitting commercial firms to have customer transaction data.
Oppenheimer’s Owen Lau told CNBC that even if stablecoins are positioned to take the card network’s revenue share, it still doesn’t mean it will replace the current status quo in terms of consumer payment.
Lau added that despite this, the conversation towards stablecoin adoption is the future, and the push to instant payments is inevitable.
Seiberg says that the transition to stablecoins is a challenge for Visa and Mastercard.
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