Why Mastercard and Visa Are All in on Crypto

During the past few years cryptocurrency has been on the minds of more than just the average day trader. Crypto has been a hot topic for governments, large investment firms, and even credit card network giants. Payment networks like Mastercard and Visa are interested in the crypto market for many reasons, but one stands out in particular: they are fearful of being made obsolete.

Cryptocurrency can and is being used as a form of currency, so these networks are exposed to market share losses if crypto payments overtake traditional card payments. Mastercard and Visa’s primary source of revenue is skimming a percentage off the top of every single transaction used on one of their cards – and cryptocurrency threatens to cut them out. Let’s dive into why these two companies are now all in on blockchain and cryptocurrency and why your business should be planning to adopt cryptocurrency.

Why are Credit Card Companies Worried About Crypto Transactions?

Initially, it might sound weird that crypto is a potential competitor to credit card companies. Most people just think of crypto as Bitcoin or a speculative asset that attracts risky investors. While this can be true with certain cryptocurrencies, the real competition doesn’t lie in the currency itself but the technology behind the crypto transactions. The three core reasons are:

• Speed of verification
• Cost to process a transaction
• Decentralized networks (that would eliminate the need for Visa and Mastercard)

Crypto transactions are very secure and hard to hack – making them a viable form of payment. They are also very efficient, requiring little time to verify the transactions. The biggest threat to disrupt the payment industry, is that some cryptocurrency payments would require pennies on the dollar to verify compared to what credit card processors charge on each transaction. 

Just to illustrate, a merchant that receives a $100 payment via credit card can pay their payment network 3% or more on that amount. Some cryptocurrencies would allow the merchant to accept the same amount, but only require a couple pennies to verify the transaction. 

To make things more difficult for Visa and Mastercard, many cryptocurrencies operate on decentralized networks, which would cut them out as the middleman for accepting payments. If you’re familiar with cryptocurrency exchanges, think of a decentralized exchange as the prime example of providing a service and cutting out the middleman. 

Cutting out payment networks could instantly reduce fees incurred by merchants. This benefit alone is already causing many of them to accept crypto as payment. If your business doesn’t accept cryptocurrency already – you should find a way to accept it if it’s permitted in your industry and location.

“Blockchain technology can change our world more than people imagine.” – Jack Ma

What has Mastercard Been Doing to Enter the Crypto Word?

In February 2021, Mastercard announced that it would begin supporting select cryptocurrencies on its network. They spoke about how they see cryptocurrency transforming the future of the payment industry. Mastercard has teamed up with companies like Gemini, Nexo, Bitpay, and Uphold who offer cards that allow users to spend their crypto directly from their wallet and/or earn crypto in the form of credit card rewards.

Mastercard has started offering crypto credit cards, which still utilize card networks, but offer cryptocurrency as the rewards for using the card. However, they are strategically planning to shift their model from using cards, to using a digital card or secure NPC device. Credit cards can be stolen, either physically or through compromised card readers, which is a security threat to users. Payments using credit cards can take days to verify and process, especially if the purchase happens over a weekend – so payment networks have already begin R&D into using blockchain to expedite verification and move away from physical cards.

Later in 2021, Mastercard acquired a crypto intelligence company called CypherTrace. CipherTrace helps institutions monitor security and fraud situations regarding cryptocurrency. Mastercard plans to integrate CipherTrace’s technology into its security measures making their network more secure. As Mastercard looks to offer crypto payments, the acquisition of CypherTrace will prove to be a beneficial one. The acquisition also shows that Mastercard does anticipate crypto being around in the future, which is still a question among many.

How has Visa Entered the Crypto Market?

Visa, like Mastercard, has also been concerned with the effects that crypto will have on their business. Visa began its crypto market journey by partnering with crypto credit card companies. Currently, there are multiple companies that offer crypto credit cards under Visa’s network. These companies include Crypto.com, Coinbase, Wirex, and BlockFi. Visa has also helped launch crypto debit cards, like the Litecoin card which lets you spend LTC (by converting into FIAT at the point of sale) anywhere Visa is accepted.

Visa has also been acquiring crypto startups to stay ahead of the blockchain wave. In December of 2021, Visa announced that it acquired Currencycloud. Currencycloud has an established currency transfer network that allows customers to transact and move money in hundreds of companies around the globe. This acquisition is set to increase Visa’s transparency and transaction speed. 

Currencycloud had previously partnered with Ripple (XRP), a cryptocurrency designed for the fintech industry. Ripple is more attractive to payment companies because they are more centralized and use a stricter process for their transaction verification process. While it may not be clear to see Visa’s use of the acquisition now, we will likely see the fruits of this acquisition in the future.

How can you adopt cryptocurrency in your business?

If one thing’s for certain, both Mastercard and Visa have read the writing on the wall and chosen to innovate before being overtaken. So what can you do in your own business to ride the wave and avoid being left in the dust? For one, if you are not already, begin accepting cryptocurrency as payment. Secondly, study Blockchain technology and understand why this technology is just as disruptive as the internet was in 1999. 

Third, try using softwares or services that utilize blockchain so you can be an early mover. There are plenty of services that utilize blockchain across real estate, e-commerce, supply chain management and more. You can choose to be an early mover and may spark an idea of your own that could future-proof your business.