Centralized payment companies like Visa, Mastercard and PayPal will have to adapt if they are to survive the potential demand for blockchain-based stablecoin payments, according to research firm Gartner.
Transaction fees: yes or no?
In a post this week, Gartner noted that while these companies' new crypto service offerings are helping to prepare the transition to a future payment infrastructure, their revenue is solely based on charging transaction fees.
The fee strategy, which is at odds with the blockchain's peer-to-peer model, could be precisely where these companies will lag behind the competition from stablecoin payment networks, according to the post written by Avivah Litan VP analyst at Gartner.
Litan described the current financial environment as “centralized decentralized finance” (CeDeFi). But he pointed out that customers of these types of services are likely to be wondering if they will be forced to pay service fees to move their cryptocurrency through the blockchain in the near future, violating the original promise of this technology.
“The companies we speak to are rightly skeptical of these services,” Litan wrote. "After all, the blockchain payment revolution is that they work peer-to-peer and eliminate central intermediaries and associated bank fees."
However, the author added that Gartner has not yet identified a significant presence of viable offers for stablecoin payments in the crypto space, indicating a lack of easily accessible applications and lower fees than currently offered by payment networks or companies such as Square and PayPal (PayPal shares - PYPL ticker).
A potential still poorly exploited
Litan said there is the potential for payment companies to provide a range of previously unseen offerings, such as transparent real-time payments of stablecoins on the blockchain linked to underlying information relating to a given transaction and protections for funds supporting stablecoins they are found in the bank accounts of the partners
. Payment companies could provide gateways for senders and recipients of a transaction and add new functionality. "Payment companies may still earn revenue from inbound and outbound value-added services and interest on the reserves underlying stablecoins," Litan said.
By 2022, CeDeFi could be ready for business adoption if regulatory guidance is in place, the research analyst said. But, if licensed payment companies can't keep up with innovations like fiat on / off ramps or fast-moving cryptocurrency exchanges like Binance and Gemini, other companies will step forward.
“Will centralized financial services companies move forward in line with the spirit of blockchain peer-to-peer payments at the risk of cannibalizing their revenue streams based on centralized fees?” Litan asked. "The answer to this question will depend on whether or not these companies make a practical choice."
