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- In the world of payments, digital assets are becoming increasingly important
- Crypto cards are being used by users to gain access to these assets and convert them to traditional currencies for spending
- Visa’s quarterly profit per share was 11 cents higher than expected
While we wait for the most recent financial results, it’s a good idea to review the previous quarters. Travel restrictions imposed by the pandemic, combined with a downward trend from the previous year, resulted in a significant drop in international volumes for both countries in the fourth quarter of 2020. Visa Inc. (NYSE: V) and Mastercard Inc. (NYSE: MA). Despite an increase in total payments, debit expenses increased while loan expenses decreased.
Fortunately, the quarter ended on the 31st, when vaccinations began to open up the economy. The best results came in March. Visa’s quarterly earnings per share were 11 cents higher than expected. Revenue was also higher than expected, indicating that some of the more traditional transactions have fueled the continued growth of online shopping. As a result, now was the ideal time for both companies to increase their cryptocurrency participation.
Place a stake in the ground
According to Jordan McKee, research director at 451 Research, a division of S&P Global Market Intelligence, Visa, Mastercard, and now PayPal all want to be seen as key players in the shift to digital and cryptocurrencies. He explained that they feel compelled to put a stake in the ground. PayPal appears to be positioning itself to avoid being on the outside looking in if cryptocurrencies and digital currencies become mainstream, according to Stephen Biggar, director of financial institutions research at Argus Research.
In an interview, he said it’s a relatively inexpensive way for them to hedge their bets in case cryptocurrencies gain traction. The commercial opportunity that cryptocurrency represents for PayPal, according to Meltem Demirors, chief strategy officer of CoinShares, a digital asset investment firm, is significant. This is partly a revenue and performance story, she said, citing Square’s strong growth in Bitcoin revenues this year as an example.
Digital currencies issued by central banks
PayPal’s announcement of cryptocurrency services suggests that the move is motivated not only by consumer demand but also by the possibility that CBDCs will become mainstream in the not-too-distant future. In a statement, President and CEO Dan Schulman said, We are eager to work with central banks and regulators around the world to offer our support and to meaningfully contribute to shaping the role that digital currencies will play in the future of global finance and commerce. In the next few years, about 20% of central banks around the world plan to launch a digital currency — that is, a digital representation of fiat money rather than a cryptocurrency.
Schulman’s remarks on CBDCs’ growing importance come after similar statements from Visa and Mastercard. CBDCs was a hot topic on Mastercard’s third-quarter earnings call, according to President and
CEO-elect Michael Miebach. Many governments are showing an increased interest in modernizing their payment stack, especially in light of COVID. Prior to the financial crisis, a number of governments were considering central bank digital currencies. And I believe that, in light of the crisis, more people are considering it as a tool, he added. In September, Mastercard announced the launch of a sandbox for CBDC experimentation.
More information on Visa’s previous quarter’s results can be found here
In the quarter that ended on March 31, Visa’s total payments volume increased by 11 percent year over year. Credit growth remained unchanged, but debit payments increased by 24%. This was a higher rate of growth than the same period last year when debit volume increased by 9% and credit volume increased by 1%. The United States, one of Visa’s largest markets, saw the highest volume growth of 17.6%. We can only assume that the majority of Visa’s customers are in better financial shape than they were a year ago. This is supported by the fact that the unemployment rate in the United States has decreased.
The reactions of Mastercard and Paypal
Mastercard is doing the same thing with Gemini, a cryptocurrency exchange based in the United States. They collaborated to create a credit card that rewards users in digital currency (bitcoin or other cryptocurrencies). As a result, users of this WebBank-issued card can receive up to 3% of the purchase price as a reward, which is deposited in the user’s Gemini account.
PayPal Holdings, Inc. (NASDAQ: PYPL), a California-based mainstream financial company, has entered the cryptocurrency market with its peer-to-peer service Venmo. Venmo’s digital wallets allow more than 70 million users to buy, sell, and hold cryptocurrencies, allowing them to spend their digital assets to pay millions of dollars.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
