The stable coin use case as a payment currency has grown and grown over the last few years. The future is already being shown by what is taking place and the ones who will slowly lose out are the gatekeepers of online payments being Visa and Mastercard. A Visa payment has 4 stages or steps where the institutions behind the card make their money.
Breaking Down the Visa Fee Process
The interchange fee is the beneficiary bank that issued the visa card and takes the largest slice of the transaction costs. The assessment fee is a fee charged by visa for rerouting the payment. Payment processor which is the payment hardware provider with the payment gateway. International service assessment is the cross border payment for converting international currencies which is paid to Visa.
Back in 2018 stable coins were seen as a new way of payments that would also save a significant amount of money for the seller if used with online transactions. Since 2018 stable coins have grown in volume for online payments from $3.3 billion up to $18.4 trillion in 2024 and will continue to increase. This is growth out of necessity as a use case and where the digital world trumps that of the regular monetary system as there are too many steps with each step having someone charging a fee.
Over the same time period Visa grew from $11.7 trillion to 15.7 trillion and Mastercard from $5.9 trillion to $9.8 trillion. One can only imagine what these figures would be if stable coins were not around as they now account for roughly 40% of the entire online payment market.
One just has to look at the volumes as an adoption rate with stable coins more than doubling between 2023 and 2024. Stable coins using the various blockchains offer an instant payment without the various gate keeper steps that charge for their services.
Stable coin online payments cost in the region of 0.1% versus the more expensive Visa and Mastercard ranging between 1.5% and 4%. This would represent a saving to the sellers using stable coins at a staggering $70 million per annum and why this is only going to grow in popularity.
That number would be far higher if there were cross border payments due to currency conversion rates which again does not effect stable coins. This allows online retailers to sell their goods globally without having to process international currency conversion costs. International payments currently range at an average of 6.5% as a cost which is frightening and non comparable to stable coin transaction costs.
I was reading a report that Amazon is now exploring the idea of accepting stable coins and issuing their own. This would make financial sense as their profit margins would be raised by another 3.5-4% and on their numbers this is big money.
I know COTI which is one of my investments is a payment service provider and they have been working with a number of big clients in this stable coin space. COTI is a stable coin launch pad and the reason why this space has been so slow with regard to these clients is they wanted the privacy feature which has now been developed and added earlier this year. These clients have to be big players for them to develop the tech required so we have to wait and see what announcements do happen.
Stable coins is not just about online purchases but could and will be used by companies paying salaries due to the reduced transaction costs. The rise of stable coins does make everyone less reliant on the banking system and they have to be fearful of what the future holds as their revenue which they took for granted is being reduced at a steady rate. Soon we will be asking what do banks do and what services do they benefit us as we can find alternative services elsewhere at lower fees.