It has been pointed out that stablecoin payments lack consumer incentives. With credit cards already offering speed, convenience, and consumer protections, the value proposition for stablecoins in everyday transactions remains unclear. However, analysts suggest that stablecoins could play a crucial role in specific areas such as cross-border remittances and business-to-business (B2B) payments. As a result, card companies are advised to actively invest in interoperability and payment infrastructure to stay competitive.
In a report released on Tuesday, Korea Investment & Securities and U.S. financial firm Stifel analyzed the consumer finance and payment sectors, including Visa (V) and Mastercard (MA). The report stated that despite the push for stablecoin adoption, consumers have little reason to replace existing payment methods, making widespread adoption unlikely. The report explains that with inadequate infrastructure and unclear accountability, stablecoin payments would inevitably have to rely on existing card networks.
Previously, shares of Visa and Mastercard had fallen following foreign media reports that companies like Walmart and Amazon were considering issuing their own stablecoins to reduce card transaction fees.
In response, Stifel noted that after extensive discussions with various companies and investors, they could not find a clear answer to the question of what benefit there is for the consumer. They emphasized that U.S. consumers currently lack motivation to switch from their existing payment methods. Credit cards, in particular, offer greater consumer convenience, including reward benefits and installment payment functions, making them more attractive than stablecoins.
The report also cast doubt on the recent partnership between cryptocurrency exchange Coinbase (COIN) and e-commerce platform Shopify (SHOP) for stablecoin payments. The partnership allows Shopify merchants to accept the dollar stablecoin (USDC) as a payment method, and Coinbase is offering a 4.1% annual interest rate to USDC holders. Stifel offered a pessimistic outlook on this, observing that depositing UScastC in a Coinbase wallet is closer to a high-yield savings product than a payment method, so its likelihood of spreading as a payment tool is low. It also noted that the 4.1% yield is unlikely to be sustained in the current environment of falling interest rates.
Based on these findings, the firms issued Buy ratings for Visa and Mastercard, while assigning a Neutral rating to Coinbase Global.
