Mastercard, Visa make deals to jolt stablecoins

• Key insights: Mastercard and Visa both made deals to boost distribution for stablecoins. 
• What's at stake: The card networks are looking to boost revenue from beyond payments while tapping the growing stablecion market. 
• Forward look: The collaborations will increase uses such as corporate treasury over time. 

Stablecoins are a small but quickly growing market, leading Visa and Mastercard to increase their bets on growing demand. 

Visa will expand an existing collaboration with Stripe-owned Bridge to issue stablecoin-linked cards in more than 100 countries. Mastercard has partnered with SoFi Technologies to enable SoFIUSD as a settlement option on Mastercard's network. 

Both deals can benefit Visa and Mastercard's need to attract new revenue not directly related to card swipes while tapping demand for digital assets. 

A recent YouGov survey of more than 4,600 cryptocurrency consumers in 15 countries funded by crypto technology firm BVNK found that 54% have held stablecoins over the past 12 months. Fifty six percent of those holding stablecoins plan to increase their stablecoin holdings in the next 12 months, while 13% of crypto users who have not held stablecoins in the last year plan to add the digital asset in the next 12 months.

There's also demand among Visa and Mastercard's issuers. Forty-seven percent of banks say their institution's clients were asking for general information about cryptocurrency, while 35% said clients were asking for the ability to make payments using cryptocurrencies, according to research from American Banker. Another 27% of banks report customers are asking for institutionally provided custody of digital assets.

Visa and Bridge

Visa is testing a stablecoin settlement system that enables issuers and merchant acquirers to settle with Visa in stablecoins. The pilot will determine how stablecoins can improve settlement, and how platforms such as Bridge can simplify the use of blockchains to process payments. 

The card network is also gauging support for future Bridge-issued digital assets – and how these new products can complement Visa's global network of issues and merchants. Stripe acquired Bridge to support cryptocurrency projects. Bridge recently received a conditional national trust bank charter from the Office of the Comptroller of the Currency, which would enable the Stripe subsidiary to sell stablecoin products under federal regulations. 

Visa does not issue its own stablecoin, but is tapping the market through its internal technology and through partnerships. The card network recently opened its cross-border real-time payments network, Visa Direct, to enable business clients to move funds to accounts instantly at all times by using stablecoins.Visa also launched a stablecoin advisory service in December, using Visa Consulting & Analytics to provide stablecoin training, market-trend analysis, use-case sizing and other consulting.

Analysts say there's room for Visa's advisory services to expand. Value added services are about 30% of Visa's revenue, according to analysts at William Blair, and 44% at Mastercard. William Blair's analysts said Visa is "playing catch-up" to Mastercard in value-added services, though it can grow faster.

"Time will tell if [the announcements] push stablecoin adoption more into the mainstream, but it does help users that already have stablecoins, access them easier, including for day-to-day shopping," Zil Bareisis, a senior analyst at Celent, now part of GlobalData, told American Banker. "Depending on the specific offerings, such cards may have advantages in cross-border settings, lowering or bypassing fees usually charged for international transactions."

Mastercard and SoFi

Mastercard is also running tests, working with SoFi to settle card transactions with Mastercard using SoFIUSD, with use cases including cross-border remittances and B2B transfers. SoFIUSD will be supported within Mastercard's Multi-Token Network, a digital asset platform that connects traditional currency to crypto. The collaboration will support interoperability between traditional currency, stablecoins and tokenized deposits. 

SoFi Bank will also settle Mastercard credit and debit transactions in SoFIUSD, and will team with Mastercard to use digital assets for treasury payments and other corporate use cases. 

Mastercard's MTN provides a venue for other parties to develop digital-asset products and validate users for financial institutions, fintechs and central banks. 

SoFi SEO Anthony Noto recently told analysts that SoFi will expand its cryptocurrency business in the next year, including lending, trading, payments and settlements using stablecoins. In a research note, analysts at William Blair said incorporating Mastercard's VAS into new payment flows is a key focus area for the card network, including "incorporating stablecoins to enable B2B and cross-border payments." 

Perhaps even more interesting in the short term is the announcements around stablecoin settlement, Celent's Bareisis said. "While that is behind the scenes for consumers, it helps businesses and issuers settle transactions faster, reducing risks and improving efficiencies,"