We said a month ago that Visa, Mastercard, American Express and Discover are in danger. Which? That of losing their dominant position in the payments sector due to cryptocurrencies. The idea is that instead of the "binaries" created by credit card companies that can cost 2% to 3% per transaction and take days to settle, the payments industry will shift to the cryptocurrency binaries, which they will cost cents and pay off immediately.
Solana (quotation SOL) Pay was the first salvo in this battle, showing how easy it is to build on crypto-rails. But at the end of last week, we saw crypto payments being taken extremely seriously by the payment giant Stripe. This may be the first move, and I wouldn't be surprised to see Block and others following.
This initial announcement isn't actually payments by crypto rail users; these are payments to creators on Twitter using crypto rails, which will be used to pay freelancers and creators. But this is probably the first step. Stripe is starting with payments on the Polygon blockchain using USDC stablecoins, but has said it will expand to other blockchains soon.
Payments are likely to eventually shift to crypto payments. This would put crypto binaries on both ends of the transaction and potentially make it instant.
I also think it is remarkable that Twitter is the first place where this system is tested. Twitter is the place where a lot of discussions about cryptocurrencies and NFT take place today, so it could point to being a more critical place for the cryptocurrency market in the future.
How payment systems will use cryptocurrencies
It is important to highlight the portions of the value chain that are being disrupted by cryptocurrencies. In this case, Twitter and Stripe are still involved in payments, but the credit card tracks are being replaced by cryptocurrencies. This will be disruptive for credit card companies, but it shouldn't be that disruptive for users. Here's how Stripe puts it:
With cryptocurrency payments for Connect, Twitter will make it possible for creators who choose to have their earnings paid on a cryptocurrency wallet. Stripe will handle all the complexity and operations related to cryptocurrencies. No code changes are required, and platforms can avoid facing the challenges of acquiring, storing or transferring cryptocurrencies on their own.
The fact that cryptocurrency binaries would be mostly invisible to users would be a huge deal. If cryptocurrency binaries are going to be common, they need to be simple and largely invisible to users. Stripe is proving this is the plan.
I think we will see Block's Square payments network move in this direction. Merchants using Block would like to receive their money instantly rather than waiting for a bank transfer, and this could be one way to do it. We may also see payment fees decline over time as crypto rails grow and replace credit cards.
A big part of the future of cryptocurrencies
Cryptocurrencies have largely been used for trading until now, but their potential is to become a disruptive part of the digital world. I think payments will be a big part of that, and the cryptocurrency binaries that replace credit card binaries make a lot of sense. Stripe is taking a step in that direction, and I expect to see Block and others follow soon. The upcoming outage for credit card companies may be here sooner than expected.