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The Challenge of Cryptocurrency Payments to Traditional Payment Providers

As per a recent news, Visa and MasterCard are distancing themselves from Binance, which is the leading crypto exchange, citing multiple legal challenges the premier cryptocurrency processor or service provider is facing in the US. Does it anyway hurt the future of digital currency payments in the fast evolving market scenario? The answer is a big NO! On the contrary, if you go by the latest global market statistics and figures, the increasing adoption and acceptance of crypto payment is posing a stiff challenge to the traditional payment providers like Visa, American Express (AMEX) and MasterCard, who are feeling the brunt of businesses going away from them.

What is the Reason to Worry for Visa & MasterCard?

The two major traditional payment providers are feeling the heat from the new payment startup companies, digital wallets and other cryptocurrency payment processors in a big way. It is significantly eating upon the volumes of these two card majors, who were till now enjoying a dual monopoly market, by grabbing a lion’s share of cross-border payments and transactions.

In fact, the business threat is mounting every single day, as a majority of consumers all over the world are switching to digital wallets and cryptocurrency payment platforms, bypassing the traditional card network, which has its own drawbacks. This is seriously nibbling upon their revenue and profit margins.

According to a new study conducted by an independent financial observer, almost 45% of Visa’s ‘historical’ revenue share is going to be affected by the year 2030 and beyond. This is simply because rival payment platforms and crypto wallets are getting traction. It is significantly affecting Visa’s revenue growth, as in this fiscal year of 2023-24, the estimated revenue is slated to drop from $32.5 billion to $32.1 billion.

What Visa Plans to Do?

Of late, Visa has tied up with cryptocurrency exchanges like Coinbase Global (COIN) for encouraging transactions. Here, traders, merchants and individuals can use digital currencies for funding card payments, after the cryptocurrency has been automatically converted into fiat money. As of today, the card payment major Visa is tying-up with more than 50 digital wallet providers, and is working towards developing a ‘native currency’. This is keeping in mind the market challenge it is going to face over the coming years.

Similarly, MasterCard has partnered with cryptocurrency lender Nexo for launching, what it calls the worlds only and foremost ‘crypto-supported’ payment card. This is somewhat a great initiative.

Apart from partnering with crypto exchanges, Visa is also working with major multinational banks to create new cryptocurrency deposit accounts for users. In fact, a lot of international banks realize this growing phenomenon of digital wallets and its popularity among masses, thereby taking countermeasures for ensuring they do not lose deposits, as customers’ money is slowly moving out of bank deposits to crypto trading platforms. But, this isn’t going to take place overnight, as the present central banking regulations on cryptocurrency transactions are unfortunately not keeping up with user demand.

What Lies Ahead?

Even though cryptocurrencies suffer from market volatilities, major credit card companies like MasterCard and Visa are foreseeing that in the coming years, consumers would increasingly use crypto for buying everyday items like groceries, apparels, pharmacy, paying restaurant bills, plane tickets, etc. Today, customers can make payments with digital currencies that are linked with Visa and MasterCard. Here, the transactions are usually dependent on third-parties for converting the crypto to traditional currencies. This is a perfect way of countering crypto payment traditional challenge, as both these credit card companies are finding out ways to streamline and decode the technicalities of cryptocurrency payments.

Reasons for Crypto Payments Posing a Challenge to Traditional Providers

  1. Lightning Fast – All cryptocurrency payments are processed way faster than traditional methods of payments. It is simply because they are not subject to inordinate processing delays, as traditional options.
  2. Transaction Fees – Unlike traditional methods of payments which can be quite expensive, all crypto payments have significantly lower fees, as they are not subject to the levies & taxes that banks and other financial institutions impose upon every single transaction.
  3. Global Acceptance – Today, crypto payments are being increasingly accepted by merchants, online stores and businesses across the globe, forcing traditional payment providers to think and work out alternative mechanisms of payments, vis-a-vis digital wallets and crypto cards. Here, CBDCs can prove to be a gamechanger in the days to come for mainstream financial institutions like banks.
  4. Financial Inclusion – Cryptocurrency payments can be used by anyone, irrespective of his/her geographical location and financial status. It is mainly because of the fact, digital payments do not require any intermediary like a bank or credit card company.
  5. Transparency & Anonymity – With crypto payments, a user can enjoy a higher level of transparency, as every transaction is recorded in a blockchain system, and so also have a higher degree of anonymity, thus making it a favorable business payment option.

After discussing the challenges faced by traditional payment methods and the rise of cryptocurrency payments, it’s noteworthy to mention how crypto payment gateways like UniPayment are powering this shift. UniPayment allows users to instantly convert cryptocurrencies into specified coins or fiat currency, offering a flexible and efficient payment solution. Compared to traditional payment providers, it reduces transaction costs and speeds up processing, thereby offering more options to consumers and businesses worldwide. Such technological innovation not only addresses the existing challenges in the realm of crypto payments but also showcases the potential direction for the growth of digital currency payments in the future

What’s Proving to be a Gamechanger?

It must be noted that even though cryptocurrencies, trending payment startups and digital wallets have the potential to dislodge traditional methods of payments, they are still prone to some barriers that hamper their acceptance and mass adoption. And, with the entry of Central Bank Digital Currencies (CBDCs), it can definitely prove to be a gamechanger. In fact, CBDCs provide a secure and less risky alternative to conventional payment mechanisms like cheque payment, credit and debit cards. FYI, a central bank digital currency is a digitized version of fiat money, which is issued by a centralized bank in the US, or in any other country.

Unlike cryptocurrencies like Bitcoin, Litecoin, Ethereum Dogecoin, Solana, etc. which operate independently and are decentralized; CBDCs are fully controlled by the issuing bank or the central banking regulatory authority of a particular country. As they are fully backed by central banks, they’re considered to be more secure and less risky.

End Note

It can be summed up that with the growing adoption and acceptance of digital currencies in the emerging and developed economies of the world, crypto payments are fast going to replace the traditional forms of payment, especially those done with Visa, Discover, Amex or MasterCard. It is simply because of the advantages it offers in the area of security, transparency, speed and cost, which make digital wallets and crypto payments a viable option. But again, if something new comes up like CBDCs, it can prove to be disruptive for digital currency payments.

IEMLabs is an ISO 27001:2013 and ISO 9001:2015 certified company, we are also a proud member of EC Council, NASSCOM, Data Security Council of India (DSCI), Indian Chamber of Commerce (ICC), U.S. Chamber of Commerce, and Confederation of Indian Industry (CII). The company was established in 2016 with a vision in mind to provide Cyber Security to the digital world and make them Hack Proof. The question is why are we suddenly talking about Cyber Security and all this stuff? With the development of technology, more and more companies are shifting their business to Digital World which is resulting in the increase in Cyber Crimes.


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