Al Kelly: Crypto Is No Threat to Visa… Yet
October 27, 2018 by Robert DeVoe
Crypto Is No Threat to Visa… Yet. At least that’s according to the payment giant’s CEO Al Kelly. But does Visa risk missing the boat entirely?
Also see: Shenzen Arbitration Commission: It’s Legal to Hold, Transfer Bitcoin
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Kelly Says Crypto Is No Threat to Visa, But Will Jump in When It Is
Kelly recently appeared on CNBC’s Mad Money with flamboyant host, Jim Cramer. In the interview, Cramer asked if the Visa company felt that cryptocurrencies were a threat. CEO Kelly replied by saying that he does not view cryptocurrency as being a serious threat in the near term.
His company would, however, consider dipping a proverbial toe in the crypto waters if cryptocurrency “becomes somewhat like a fiat currency”. But by the time that happens, Visa may have already missed the boat.
Ignore Crypto at Your Peril
For years now, banks and other traditional financial stalwarts have called cryptocurrencies every name under the sun. Name-calling aside, their arguments typically boil down to the same key components. That being, cryptocurrencies like bitcoin aren’t backed by anything, aren’t sufficiently regulated, lack intrinsic value, and so on.
Despite the recent market downturn and subsequent sideways movement, big businesses are starting to get involved. Whether it’s IBM working with Stellar, or Microsoft and Intel joining the Enterprise Ethereum Alliance, the tides are slowly beginning to turn.
The companies that get involved in crypto now could be giving themselves a critical first-mover advantage. That advantage could be enough to propel them headfirst into any potential mass adoption that cryptocurrency could see shortly.
And unlike Microsoft, Intel, and IBM, the transmission and movement of money is the only business front that Visa operates in. If their position were to be weakened or even just threatened, it could cause a massive fallout.
The Threat of Cryptocurrency
Today, Visa is the undisputed king of electronic financial transactions. Stores and businesses that accept Visa are strewn across the entire planet. A Visa card issued in Delaware can just as quickly be used in Denmark. But there is a catch to this seemingly perfect system.
The most obvious issue for merchants is the shockingly high fees they pay. According to Merchant Maverick, Visa fees can range from anywhere between 0.25 percent and 10 cents to 2.99 percent and 20 cents per transaction.
For businesses that operate on thin margins (like restaurants and wholesale companies), these types of fees can carve off vast chunks of potential operating revenue and profit.
One of the advantages of cryptocurrency is that fees can be as close to zero as possible. Currencies like Stellar Lumens XLM have fees that are less than one one-hundredth of a cent. In the case of tangle-based cryptocurrencies like IOTA, there is no monetary fee, only a computational expense.
As far as threats go, it’s doubtful that a company with as much overhead as Visa would be able to survive if it needed to compete with free or nearly free transactions.
Does Crypto Need Visa?
This line of thinking begs the question–does crypto need Visa? Or in other words, could Visa offer something that cryptocurrencies can’t already do?
According to some experts, that answer doesn’t bode well for Visa. At the Dubai International Blockchain Summit back in January of 2018, the CEO of Pundi X, a crypto startup with a growing point-of-sale infrastructure had this to say:
“What we want to do is actually to really decouple from the traditional banking system altogether, because there is no point to use a crypto card that has to go through a traditional payment channel.”
For the sake of the argument, let’s presume that Visa gets involved in cryptocurrency. Potential offerings would include payment cards that draw on cryptocurrency balances. Another could be credit cards that draw from crypto-backed lending services like Nexo, Salt, or Celsius.
In such setups, perhaps Visa could offer some degree of fraud protection from stolen payment cards. They could also allow for the near-instant deployment of millions of payment card terminals that would be able to process crypto transactions.
If Crypto Is No Threat to Visa, Why is Mastercard Already Chasing Blockchain Tech?
What could prove to be another severe hindrance to Visa’s potential transition into cryptocurrency is arch rival, Mastercard.
Back in April 2018, Bitsonline wrote about Mastercard’s latest blockchain patent, which was most definitely not their first. Just last month, the company filed for yet another blockchain patent. The latest filing was for “A method for managing fractional reserves of blockchain currency…”
With Mastercard biting at Visa’s heels, and Visa itself reluctant to get involved, it’s possible Visa could find itself left out in the cold and hopelessly behind the times. Crypto is no threat to Visa? Let’s wait and see.
Have your say. Is Kelly being naive to think crypto is no threat to Visa?
Images via Pixabay, Pundi X
