The "deadly threat" of credit cards and online payments: Why are Walmart and Amazon also issuing stablecoins?

Stablecoins are expected to help retailers like Walmart and Amazon bypass traditional Payment Networks, saving billions in transaction fees; while achieving instant Settlement of funds, whereas traditional credit card transactions require a wait of several days. In the face of this threat, traditional payment providers like Visa and Mastercard are trying to position themselves as key infrastructure providers for the stablecoin ecosystem. For consumers, analysts say, "Price and Settlement times are indeed beneficial for merchants, but they don't mean much for consumers."

Written by: Long Yue

Source: Wall Street Journal

Retail giants like Walmart and Amazon are quietly laying out their plans for stablecoin payments. This seemingly innovative financial experiment is, in fact, a direct challenge to traditional payment giants like Visa and Mastercard—a response to the billions of dollars spent on transaction fees every year, which has finally pushed these retail giants to seek solutions that completely disrupt the existing rules of the game.

An earlier article from Wall Street See mentioned that multinational giants like Walmart and Amazon have recently started exploring the possibility of issuing their own stablecoins in the United States. Online travel giant Expedia and other large companies, including airlines, are also discussing plans to issue stablecoins.

Bloomberg's latest analysis points out that the motivation for these companies to issue stablecoins is not to embrace cryptocurrency innovation, but to gain new negotiation leverage in long-term fee disputes with Visa and Mastercard, and even to completely bypass traditional payment networks. Each year, these retailers pay billions of dollars in fees within traditional payment systems, including interchange fees incurred when customers use their debit or credit cards for purchases. Even more frustrating is that payment settlement often takes several days, delaying the time it takes for merchants to receive their sales revenue.

Stablecoins offer the enticing prospect of instant settlement—funds do not have to wait several days to arrive like traditional credit card transactions. More importantly, this could help them escape the predicament of paying high processing fees to banks and payment networks.

Doug Kantor, General Counsel of the National Association of Convenience Stores, put it bluntly:

The reason for such high fees is that Visa and MasterCard have organized banks across the country into a textbook case of a pricing cartel, telling banks how much to charge merchants. As a result, all these banks that should be competing with each other do not compete when it comes to charging merchants card swipe fees.

Retail giants attempt to bypass traditional Payment Networks

Retail giants have long been trying to launch payment alternatives to bypass the card-based systems dominated by Visa and MasterCard.

Walmart is already in a leading position in the pay-by-bank field, which allows consumers to pay merchants directly from their bank accounts without using credit or debit cards. Last year, Walmart announced an upgraded version of its pay-by-bank service.

The Wall Street Journal article mentioned that Walmart also lobbied to add a separate amendment to the GENIUS Act to introduce more competition in the credit card industry. The company has long sought to enter the financial services sector, hoping to leverage its network of millions of customers and employees.

Amazon's related efforts are still in the early stages, with some discussions focusing on launching the company's own coin for online shopping. Even if the decision is made not to issue its own stablecoin, these companies are weighing how to use external stablecoins, such as through a merchant alliance led by a stablecoin issuer.

With the Trump administration easing cryptocurrency regulations and advancing the GENIUS Act to establish a regulatory framework for stablecoins, stablecoins are facing unprecedented development opportunities.

A commercial trade organization led by the Merchant Payment Alliance has been in talks with U.S. lawmakers in recent months to push for the passage of the GENIUS Act. These trade organizations state that a regulatory framework for stablecoins will provide merchants with an alternative payment method that can significantly reduce their costs and compete with Visa and Mastercard.

Traditional Payment Networks Strike Back

In the face of potential threats, traditional payment providers like Visa and Mastercard are not sitting idle. The two companies are trying to position themselves as key infrastructure providers in the stablecoin ecosystem.

Last year, Visa announced the launch of a platform to help banks issue their own fiat-backed tokens. Recently, the network also collaborated with Stripe's Bridge division to allow businesses to launch credit cards associated with stablecoins. Mastercard, on the other hand, added stablecoin settlement support for merchants.

Mastercard Chief Product Officer Jorn Lambert stated in a statement last month: "Unlocking this potential is crucial for how we respond to a rapidly changing world, by providing people and businesses the freedom they want with the choices they deserve."

At the same time, other participants in the payment ecosystem are also accelerating their layout. Shopify announced this week that it will allow merchants on its platform to accept stablecoin payments, a service supported by Stripe and Coinbase.

Real Challenges of Consumer Acceptance

Although stablecoins offer significant advantages to merchants, convincing consumers to abandon their habitual use of credit cards is another matter. Sanjay Sakhrani, Managing Director and Senior Analyst at Keefe, Bruyette & Woods, pointed out: "Price and settlement times are indeed beneficial for merchants, but they don't mean much to consumers."

Stablecoins also require consumers to have a cryptocurrency wallet, which typically needs to be set up through third-party platforms like MetaMask or Coinbase Wallet, adding friction to the purchasing experience. More importantly, consumers need to see a clear advantage over traditional credit cards, especially in cases where credit products offer reward points.

PayPal is attempting to address some use case issues by building a platform that helps merchants make payments to overseas suppliers using stablecoin.

However, history shows that this path is not easy to walk. The promotion of direct bank payments in the United States has been slow, leaving behind numerous failed cases. For example, the Merchant Customer Exchange (MCX), supported by a coalition of American retailers including Walmart and Target, did not gain widespread adoption before it was acquired by JPMorgan nearly a decade ago.

Scott Talbott, Executive Vice President of the Electronic Transactions Association, warned that "any new system will have its challenges, risks, and costs, and stablecoins will also be affected by these same forces."