PayPal’s and Visa’s stablecoin-related announcements have reintroduced payments as a core use case for blockchains. Perhaps with the exception of Block, which has a long-standing Bitcoin and Lightning initiative, crypto-native experimentation signifies emerging competition for traditional networks and applications—who have to contend with the onerous process of adopting on-chain systems.

The following is a quick recap of the recent news:

• PayPal unveiled an Ethereum-based, dollar-pegged stablecoin, PayPal USD ($PYUSD). It's fully backed by U.S. dollar deposits and short-term U.S. Treasuries, and it’s redeemable on a 1:1 basis for USD. In the press release, PayPal states that PYUSD could ultimately help streamline payments across its digital wallet platform and merchant network.
• Visa announced its plans to start settling payments using USDC on Solana, which evolved from preliminary trials with externally owned accounts (EOAs) on Ethereum. Visa believes this move will render the payment settlement process quicker and more cost-effective for its merchant ecosystem.

Both companies clearly recognize the value of fast and inexpensive global transactions. From our perspective, Visa’s forward integration with merchant acquirers is most interesting. Consumers today enjoy nearly instant P2P transactions that are enabled by cost-efficient debit platforms and mobile apps that maintain a "stored balance" (instead of requiring a linked companion bank account). Merchants, particularly those operating cross-border, have not been afforded the same luxury. They must be sponsored into payment networks and suffer delays (ranging 1-3+ days) as merchant acquirers and issuers reconcile funds. Visa’s USDC option has solved this issue for two, large merchant acquirers, Worldpay and Nuvei, by hastening transaction settlements.

While Paypal’s and Visa’s early efforts appear to be focused on smaller markets and cross-border transactions, they can (and likely will try to) scale to traditional brick-and-mortar payments. Ultimately, we could envision them developing a feature-complete, stablecoin-based payment mechanism. While exciting, U.S. products will face an appreciable challenge in negotiating consumer protections, such as chargebacks, given the inherently irreversible nature of on-chain transactions.

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Weekly explorations into emerging crypto trends and how to navigate 2023 from the Slow Crypto Team, Sam Lessin, Clay Robbins, and Caroline Cline.

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