Santander: Bitcoin Threatens Credit Card Issuers

New research from Banco Santander suggests it believes credit card stakeholders will be impacted by bitcoin.

AccessTimeIconSep 8, 2016 at 4:01 p.m. UTC
Updated Sep 11, 2021 at 12:29 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

A securities affiliate of Spanish banking group Banco Santander is predicting bitcoin will have a significant impact on the legacy finance ecosystem should it see wider adoption.

The report, published earlier this week, stems from a meeting involving Santander researchers, Santander Investment Securities, Brazilian bitcoin brokerage Mercado Bitcoin and local investors. While short, the publication offers a take on the risks (or opportunities) card issuers, acquirers, exchanges and banks would face in a future should the use of digital currency become more mainstream.

Perhaps most at risk, according to the report, are the card issuers and acquirers.

Researchers Henrique Navarro and Bruno Mendonca noted:

"Simply put, we believe a future with bitcoin transactions with their low (or no) costs and fees puts at risk the entire business model of credit and debit card companies. Acquirers such as Cielo (through net MDRs and POS revenue) and issuer banks (through interchange fees) potentially could suffer the most, in our view.”

Specifically, the report identifies long transaction times, operational costs and associated fees and taxes as factors that would put issuers and acquirers at a disadvantage.

"The risk increases as more and more merchants and suppliers accept bitcoins," the report adds.

Impact on card brands, banks

The report examines the potential impact on banks, offering a broad overview of recent work by major financial institutions to test and experiment with various blockchain applications.

Notably highlighted is the recent blockchain settlement system created by UBS, BNY Mellon, Deutsche Bank and Santander.

The report's authors state:

"We believe the blockchain concept has the potential to redefine money transactions in the banking world, taking advantage of the power of decentralized computer networks to eliminate difficult, time-consuming and costly trading among banks. IT, transaction costs, the banks’ huge back-offices, capital requirements – all of those could change in a material way, in our view."

Major card brands, too, stand to reap the advantages of the technology, according to the report.

Companies like Visa and MasterCard, among others, "could benefit" from using blockchain to lower transaction, IT and back-office costs, the authors write.

The report also highlights a recent initiative launched by Visa to test interbank payments, indicating that such systems could threaten the supremacy of the global interbank payments network SWIFT.

"In our view, it is definitely a challenge to SWIFT (banks' interbank payment system)," the report states.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.