Stablecoins are the biggest threat to the credit card industry: how low transaction fees can disrupt the payment network?

When people talk about the impact of stablecoins, the market generally worries about the threat to bank deposits or money market funds. However, Bloomberg reports that the industry that may be most affected is the credit card industry. High credit card transaction fees have long earned substantial profits for banks and payment giants, but these will face challenges after retail giants like Amazon explore their own stablecoins.

Stablecoin Precision Strike: Credit Card Transaction Fees Become the Biggest Weakness

Credit card transaction costs in the United States are much higher than in Europe, with average swipe fees ranging from 1.5% to 3%. These fees support the rewards points system and sustain payment networks like Visa, Mastercard, and American Express. However, the existence of stablecoins offers a faster and cheaper payment alternative.

If retailers can convince consumers to switch to their own brand of stablecoin, they can not only reduce card processing costs but also absorb the profits generated from U.S. Treasury reserves, further expanding their profit margins.

The struggle of stablecoins under the GENIUS framework: corporate implementation and bank backlash

The recently passed "GENIUS" Act in the United States provides a clear compliance path for payment stablecoins, with financial institutions and companies in the United States, South Korea, Japan, Hong Kong, China, and the European Union all beginning to explore the issuance of their own stablecoins.

To avoid competition between stablecoins and deposit accounts or money market funds, regulations have also set key restrictions: issuers cannot directly return profits to holders. However, Coinbase and PayPal have chosen to package this as a "reward program," indirectly providing users with profit returns.

Various banks and lobbying groups have expressed concerns about this, emphasizing that payment stablecoins do not engage in lending activities and are not subject to securities regulation, and therefore should not be compared to banks in terms of providing interest or returns, posing a threat to traditional finance.

( The U.S. banking industry demands to close the vulnerability of "GENIUS": Stablecoin interest may trigger a $6.6 trillion deposit outflow )

The Ambition of Retail Giants: From Amazon to Walmart

Large retailers have already recognized the opportunity, with Amazon and Walmart revealing that they are researching their own stablecoin projects, attempting to enhance profits by reducing transaction fees and controlling payment processes. Although non-financial companies are not legally allowed to issue stablecoins independently, they can launch them by collaborating with issuers or intermediaries such as Circle or Paxos.

Circle CEO Jeremy Allaire once stated, "In the future, we hope to collaborate with retailers to create a stablecoin payment network that challenges Visa and Mastercard."

( Next wave of competition: From general-purpose to functional, why "customized stablecoin" is a hard requirement for enterprises? )

Is the moat of traditional payment still solid?

American Express CEO Stephen Squeri believes that traditional payment systems still hold advantages: including fraud protection, dispute resolution, convenience, and rewards points.

However, upon closer examination, these advantages are built on high credit card processing fees. Once stablecoins provide the same or even more attractive reward mechanisms with lower fees, the traditional advantages will be quickly diluted.

Furthermore, if retailers cooperate with "Buy Now Pay Later (BNPL)" providers, they could even replicate the borrowing functions of credit cards, posing a more direct challenge to banks.

( Inventory of the fiercely competitive stablecoin L1 blockchain: Who can seize the global "on-chain payment" battlefield? )

Looking at the stablecoin payment revolution: Credit card companies are at the forefront.

Senator Richard Durbin has been pushing for legislation for years to reduce credit card transaction fees, following the practices of Europe and the UK, but it remains unresolved. With technological innovation and the strategies of retail giants, the payments industry can no longer remain complacent. Bloomberg bluntly stated: "In this payment revolution, stablecoins may deliver a fatal blow to the core of credit cards."

In the United States, the payment industry has become too comfortable. The disruption that stablecoins bring to credit card transactions will far exceed their impact on money market funds and deposit accounts.

This article Stablecoins Become the Biggest Threat to the Credit Card Industry: How Low Transaction Fees Disrupt Payment Networks? First appeared on Chain News ABMedia.