Big retailers’ commerce ecosystems might provide a promising ground for new payment methods, particularly their own stubcoin.
The interconnected web of platforms, businesses, and customers seems like a natural fit for these coins that can quickly transfer between buyers and sellers. Essentially, these coins are backed by reserves tied to the dollar, supported by short-term assets within the United States.
PayPal is a good example, showcasing how such coins can adopt characteristics of traditional payment methods, mainly as a competitor to credit cards. As reported in April, PayPal Holdings plans to introduce a rewards program this summer. This program will let users earn rewards from their PayPal USD (PYUSD) Stablecoin holdings, whether in a PayPal or Venmo wallet. Users can immediately use these rewards to send money to others, fund international remittances, exchange for fiat currency, swap for other cryptocurrencies, or make purchases with PayPal at merchants. Currently, Amazon and Walmart are reportedly considering releasing their own stablecoins.
Over a Decade of Change
The concept has evolved significantly since Facebook credits were introduced in 2009 in an Alpha version. Back then, cryptocurrency was primarily associated with in-app purchases. However, that initiative didn’t last long—it folded in 2012.
Now, over ten years later, using digital assets in a way that sidesteps conventional systems is becoming more typical. According to Pymnts Intelligence’s report from 2022, most tech-savvy consumers are utilizing crypto payment options, with 26% expressing a strong interest in using crypto for transactions at merchants that offer rewards or discounts.
The potential for retailers to save billions in replacement and processing fees is significant—it’s worth noting that total exchange fees across the board reached approximately $160 billion in 2022. In its latest report, Amazon highlighted that processing costs amounted to $98.5 billion last year as part of operating expenses. Such figures led to a slight dip in MasterCard and Visa stocks recently, which has raised some eyebrows.
Challenges Ahead
However, establishing a new payment method isn’t straightforward. As noted by Pymnts, using Stablecoins not just for transferring funds but also as a direct means for consumer payments complicates matters. Unlike traditional card networks, which have standardized dispute resolution processes, Stablecoin mechanisms often lack clear guidelines. The regulatory landscape for Stablecoins is still evolving.
Stubcoins will require a reserve as well. Companies like Amazon and Walmart will need to create a mix of assets—such as dollars and short-term investments—possibly even commercial paper to underpin their coins, at a rate of 1:1.
For consumers, holding a variety of stubcoins in digital wallets may feel similar to using prepaid or gift cards. They tend to be tied-up funds waiting to be spent within the retail ecosystem. In such cases, consumers might turn to their credit cards instead. Transactions with credit cards are also reversible, and they don’t necessitate a dedicated wallet. It’s still uncertain whether Stablecoins will truly revolutionize e-commerce.
