With some merchants starting to desert them in favour of cryptocurrencies, Mastercard and Visa are beginning to think the unthinkable…
The news that Bitcoin is now worth more than Visa and Mastercard combined might explain why its hitherto uneasy place within the payments world is beginning to change. In March, Bitcoin reached an all-time high value of over $60,000 per coin, with a market capitalization of $1.15 trillion. By contrast, the combined value of the three highest-valued global banks – JP Morgan Chase, Bank of America and the Industrial & Commercial Bank of China – is $1.08 trillion. Meanwhile, Visa and Mastercard combined have a market cap of ‘just’ $871 billion. Suddenly, cryptocurrency not only has a seat at the table, it’s moved directly to the top chair. No wonder payment giants including Visa, Mastercard and PayPal are taking it seriously.
If you can’t beat them, join them
Cryptocurrency’s rise to legitimacy is the result of a perfect storm of factors all combining at once. Market forces have been a key driver, with merchants reacting against the impending increase in fees charged by Visa and Mastercard for some credit card purchases. Already hit by the effects of the pandemic – not least bricks-and-mortar retail closures and the resultant loss in revenue – merchants now face having to pay even more in ‘swipe fees’ for online purchases by credit card from the two major issuers. So, naturally, they are looking for alternatives – and cryptocurrencies such as Bitcoin are beginning to look like a viable option.
The response from those most threatened by these developments has been unexpected but refreshing: Mastercard has announced it will let merchants accept payments in crypto this year, whilst Visa has backed the first-ever credit card to offer Bitcoin rewards.
Futureproofing the payments market
These moves reinforce a shift in attitude from the traditional market leaders, who seem to have accepted the need to ‘change, adapt and adopt’ in facing the challenges of the future. This backs the commitment made by Mastercard CEO Michael Miebach for 2020 Q4, when he announced that digital currency payments would be integrated ‘directly on our network’. While Mastercard previously supported limited payment-only crypto transactions through partners Wirex and Uphold, the new strategy will mean settlement is also covered – in other words merchants will be able to conduct transactions direct with their customers in crypto, rather than first converting them into fiat currencies.
Meanwhile, the Bitcoin Rewards Visa Credit Card sees Visa team up with BlockFi to offer a credit card offering rewards not in points or air miles but in Bitcoin. The scheme entails that any customer spending $3,000 or more on the card within the first three months of opening their account will receive $250 in Bitcoin.
What’s in it for them?
Why this sudden change of heart? You can guarantee that the world’s leading credit card suppliers haven’t engaged in such an about-turn without weighing up the business case thoroughly. And what they’ve concluded is there is an overwhelming advantage to them in being seen to back the right horse. By
supporting Bitcoin – or cryptos in general – they are reading the shift in customer behaviour, seeing the growing confidence in both merchants and consumers and recognising the potential revenue streams they could benefit from.
Of course, it was only as recently as 2018 that Visa and Mastercard deemed cryptocurrency to be a ‘high risk’ asset – and a word of caution should probably be added here that the landscape could yet change. But, by welcoming Bitcoin et al into the fold with open arms, they will be hoping that they can help encourage further confidence amongst the consumer base: if you legitimise it, they will come…