Retailers Are Betting On Stablecoins. Should Consumers Care?

Stablecoins have become a prominent topic in the cryptocurrency sector, especially after the recent approval of the U.S. Stablecoin bill in the Senate last month. Remarkably, it isn’t only crypto fans who are paying attention this time – several of the biggest retailers and financial entities are involved. Walmart (NYSE:WMT), Amazon (NASDAQ:AMZN), and payment leaders such as Fiserv (NYSE:FI) are reportedly looking into stablecoin trials or developing infrastructure to support them. Why is this happening? Stablecoins provide significantly lower fees compared to card networks, which typically impose an average of 1.5% per transaction in swipe fees. Stablecoin transactions can be finalized in seconds, featuring minimal processing fees and no traditional intermediaries. This presents a strong incentive for high-volume retailers. However, the crucial question arises: if stablecoins are beneficial for merchants, what do they offer to customers?

Why Are Retailers Moving Towards Stablecoins?

Stablecoins represent a category of cryptocurrency aimed at maintaining a 1:1 peg with government-issued currencies like the U.S. dollar. Essentially, they bring the dollar into the blockchain space. This results in quicker settlements, transparent transactions, and possibilities for programmable payments — all devoid of the volatility commonly seen in cryptocurrencies. Recent legislation in the U.S. is enhancing the credibility of this sector. A stablecoin bill that was passed in the Senate last month establishes clear regulations: full reserve backing, regular audits, and anti-money laundering measures. This initiative is predicted to speed up both institutional and consumer adoption, allowing stablecoins to take a larger role in payment systems.

For retailers, the calculations are persuasive. U.S. merchants incurred an estimated $187 billion in card fees last year, according to the Nilson Report, with a significant portion going to companies like Visa (NYSE:V) and Mastercard (NYSE:MA). This represents a substantial figure, and retailers are evidently seeking ways to reduce this considerable expense. Stablecoins provide retailers with a means to execute transactions instantaneously, lessen dependency on conventional banks and payment intermediaries, and potentially forge more direct connections with consumers.

The e-commerce giant Shopify, for example, already allows merchants to accept USDC, a dollar-backed stablecoin, through integrations with Coinbase and Stripe. Walmart is reportedly investigating similar options. Concurrently, Fiserv and other companies are creating stablecoin infrastructure designed for smaller banks and fintech firms. There are additional advantages as well. Through programmable features, merchants can create customizable rewards, cashback in tokens, or temporary discounts triggered by wallet activities. related: Are Stablecoins A Real Threat to Visa and Mastercard Stock?

Will Customers Embrace This Change?

This is the challenging aspect. In spite of the numerous benefits, stablecoins currently do not seem to provide a markedly improved experience for the typical consumer. Cards remain the preferred payment method for most people. They have been in existence for many years, are widespread, user-friendly, mesh well with the current banking framework, and come with robust fraud protections and appealing rewards. Meanwhile, utilizing stablecoins might necessitate that customers establish a separate crypto wallet, introducing additional steps to the checkout process. This increases friction, especially when the existing system functions well for customers. There is also some historical context. Other low-cost options like pay-by-bank have faced difficulties in the U.S., despite offering similar benefits to merchants.

Without a clear value proposition for consumers during checkout, even well-crafted systems could find it hard to gain traction. Nevertheless, there is ample opportunity for innovation. If merchants can reinvest even a small portion of the $187 billion they save on swipe fees into customer rewards and incentives, that formula might begin to shift. Consider Shopify, which now offers 1% cashback in USDC when customers use stablecoins for payment. Coinbase is reportedly developing systems that would support loyalty programs, credit products, and more, which are linked to stablecoin wallets. If retailers can combine stablecoin payments with enticing rewards, faster refunds, personalized offers, and increased privacy, the value proposition becomes much more attractive.

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