Centralized payment companies such as Visa, Mastercard and PayPal will need to adapt if they are to survive the potential demand for blockchain-based stablecoin payments, according to research firm Gartner.
In a Thursday blog post, Gartner notes that, while new bitcoin (BTC) offerings from such firms are helping to prepare the transition to a future payment infrastructure, their revenue is based on charging transaction fees for clearing and settlement.
The fee strategy, which sit at odds with blockchain’s peer-to-peer model, could be the very thing that sees these firms fall behind the competition from stablecoin payment networks, per the post penned by Avivah Litan, distinguished VP analyst at Gartner.
Litan described such firms as “centralized decentralized finance” (CeDeFi) – in which centralized, mainstream firms with big bitcoin holdings bring innovation to the DeFi space and, conversely, adopt DeFi’s biggest apps.
But Litan points out that customers of these types of services are likely wondering if they will be obliged to pay centralized service fees for moving their cryptocurrency along the blockchain in the near future, defeating the technology’s initial promise.
“Companies we speak to are justifiably skeptical of these services,” Litan wrote. “After all, the revolution of blockchain payments is that they execute peer-to-peer and eliminate central intermediaries and associated bank fees.”
However, the author added Gartner has yet to see a range of offerings from the crypto space for viable stablecoin payments, pointing to a lack of easily accessible applications and fees lower than are currently on offer from card networks or firms like Square and PayPal.
Litan said there’s potential for card firms to provide a range of as-yet-unseen offerings, such as transparent real-time stablecoin payments on the blockchain tied to underlying information regarding a given transaction, and protections for funds backing stablecoin sitting in partner bank accounts.
Card companies could provide the gateways for payors and payees and add functionality, according to the post.
“The card brands could still earn revenues from on and off ramp value-added services, and from interest on the reserves underlying the stablecoins,” Litan said.
By 2022, CeDeFi could be ready for enterprise adoption if the regulatory guidance is present, the research analyst predicted.
But, should the legacy payment companies fail to keep pace with the likes of fiat on/off ramps, such as fast-moving cryptocurrency exchanges like Binance and Gemini, other firms are going to step forward.
“Will these centralized financial services companies go forward in line with the spirit of blockchain peer to peer payments at the risk of cannibalizing their existing central-clearing house based-revenue streams?” Litan asked. “The answer will depend on whether or not these firms have any practical choice.”