The term "disruption" implies a threat — something is being displaced, and often that displacement is permanent. This is especially sensitive when the displacement is happening in as systemically significant a field as
Then again, disruption drives progress not just by introducing new products, methods and ideas, but also by forcing incumbents to adapt.
Can they, though?
Stablecoins are touted as an existential threat to the business model of large payment solutions providers, "card killers" that offer merchants an alternative to
They are also a tool that most of the world's large incumbents have been experimenting and even building with for years, as part of a continuous innovation arc — after all, today's payment giants were themselves industry disruptors not that long ago.
So, which is it? Will stablecoins end up being more a threat, or a way for incumbents to deepen their moat?
The answer is: Neither.
To start with, stablecoins themselves are not a threat to credit card companies. They don't process payments; they are the payment. And they don't offer the range of payments-related services merchants and consumers have come to expect, such as fraud prevention, charge-backs, refunds, FX management, credit, rewards and more.
Rather, stablecoins are a core component of new platforms that are emerging from the blockchain ecosystem to offer a range of standard
They are also one of many tools incumbents are leveraging to improve internal operations and client service, while getting into position for greater global stablecoin adoption.
To highlight two obvious examples, Visa and Mastercard have been working on stablecoin integrations since as far back as 2021. These include
What's more, the payment giants bring considerable heft to stablecoin adoption, with their vast distribution networks and brand recognition.
But is that enough to keep disruptors at bay?
Newcomers building stablecoin-based payments platforms may not have the heft of the incumbents, but they have plenty of advantages that could, with time, end up displacing the current payments ecosystem structure.
One is a focus on stablecoins. The new platforms are deep in blockchain weeds, they know the new apps coming down the pipeline, they understand how different ecosystems can interconnect, they have a technology-first culture of building and shipping, and they have a clear vision of what tomorrow's networks can look like. This confers greater flexibility in incorporating more far-reaching payments innovation into their road map design — peer-to-peer marketplaces for loyalty points, for example, or AI-driven micropayments, or online identity for decentralized credit management, not to mention use cases we have not yet imagined.
St. Cloud Financial Credit Union will be issuing its own stablecoin at the end of this year, becoming one of the first U.S. credit unions to do so.
For incumbents, stablecoins may be important, but they are more an upgrade than a foundational platform. In pushing forward a transformative new technology, focus matters.
Another focus is agility. Many newcomers are either private businesses or they operate under different and less cumbersome regulatory parameters — in both cases, this implies they can make rapid decisions and act on them quickly.
Visa and Mastercard, on the other hand, are large, public companies with entrenched hierarchies and layers of cautious decision-making.
A third is choice. The number of service providers in the credit card payment space is limited due to industry concentration, which can lead to rigidity in accepted processes and conditions. The emerging stablecoin ecosystem, on the other hand, has a rich texture of different service styles and functionalities with which to tempt users eager to test new formats and improve on the status quo.
A fourth is culture. New platforms emerge with the ambition of disrupting existing players by offering a better service, developing new products and markets or both. Incumbents, on the other hand, may embrace innovation, but their version is likely to be more defensive in nature, an investment in warding off upstart competition rather than a belief their way of doing things has to change — for most, they'd rather it didn't.
Can newcomer advantages be harnessed by the incumbents via acquisitions or hires? Perhaps, but it's harder than it sounds — ambitious startup idealists rarely flourish in incumbent cultures. Culture matters.
This highlights the age-old struggle between the old and the new, between innovation and protection of territory. Can incumbents truly disrupt themselves?
Financial history is littered with names of businesses that failed to see disruption coming — that is not the case with the large credit card companies, who have been actively exploring stablecoin-related services. Distribution, merchant connections, consumer habits, network effects and global trust make a powerful moat.
But blockchains themselves are distribution networks with the potential to scale much faster than fragmented legacy systems. What they don't yet have is the brand recognition, compliance with global regulations and transaction volumes.
So, looking ahead, the race is not decided. Stablecoins are not a threat to the incumbents — the new platforms emerging around them are. The disruptors have strong advantages. So do the incumbents. And the participation of both in pushing stablecoin use cases forward means that adoption is not limited to early movers, as with some new technologies.
Incumbents and disruptors are rowing in the same direction of improving payment services, perhaps at different speeds and with different finish lines. In the end, the market will decide, there will be more than one winner and users of all types around the world will benefit.
