Stablecoin On-Chain Volumes Pose a Threat to Card Networks
The growing popularity of stablecoins has led analysts to predict that by 2023 their annual transaction volumes will surpass those processed by Visa - the largest card network in terms of transaction volume - potentially having serious implications for its future profitability as well as those other major players such as Mastercard, American Express and Discover
Dec. 24, 2022 3:43AM
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A close up shot of a credit card with several coins scattered around it representing the shift from traditional payment methods towards digital currencies like stablecoins
As the digital payments landscape continues to evolve, a new trend is emerging that could potentially spell trouble for card networks such as Visa, Mastercard, American Express and Discover. Last year, stablecoins settled more than $7 trillion on-chain and are now running at an estimated rate of around $9 trillion per year. This is significantly more than the combined total of all four major card networks which together process approximately $15.2 trillion annually. The growth in stablecoin usage has been fueled by the increasing demand for faster and cheaper cross-border payments, with many businesses turning to these digital tokens as an alternative to traditional payment methods. Furthermore, the use of stablecoins also offers greater transparency and security compared to other forms of payment processing. Analysts predict that if current trends continue then by 2023 on-chain stablecoin volumes will surpass Visa’s annual processing volume of approximately $12 trillion. This would mean that Visa would no longer be the largest card network in terms of transaction volume and could have serious implications for its future profitability. The potential impact on card networks is not just limited to Visa either; Mastercard’s annual processing volume currently stands at around $2.2 trillion while American Express processes around $1 trillion and Discover less than $200 billion each year respectively. All four companies could potentially be affected if more businesses choose to switch from traditional payment methods to using stablecoins instead. While there are still some regulatory hurdles that need to be overcome before widespread adoption can occur, it appears that this new form of digital currency may soon become a viable alternative for many businesses looking for faster and cheaper ways to make payments across borders. As such, it remains unclear what kind of effect this will have on existing card networks but one thing is certain – they will need to adapt quickly or risk being left behind in an increasingly competitive market place.