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Mainstream payment firms Visa and PayPal go heavily into crypto. Here’s to the future

23.06.2021

It is absolutely clear that cryptocurrency is very much reaching its long anticipated status as a de facto method of payment worldwide, and nothing is more telling than today’s activity from two major global payments firms, Visa and PayPal.

Visa, one of the world’s most renowned merchant services companies, has a longstanding reputation for extremely tough criteria and is one of two corporate giants that keep the electronic payments business well run and regulated.

For example, Visa’s draconian approach to types of business and certain activities, along with restricting the amount of ‘chargebacks’ a company can have before losing their merchant services account are two risk management methods that keep Visa at the very top of the tree and as a benchmark for the entire payments business worldwide.

Today, Visa, a traditional and risk averse company with the huge responsibility of ensuring security and safety for most payment processing around the world, has shown that cryptocurrency is very much part of its plan, as Visa has invested in Blockchain Capital, a venture capital company whose targets for funding are cryptocurrency related, as part of the firm’s Fund V.

Visa, along with PayPal, an equally ‘household’ name in the payments business which, although using a different business model to traditional carriers such as Visa, is equally risk averse, have invested alongside other old school companies to a combined total of $300 million.

Certain investors in this particular round of funding will be participating in Blockchain Capital’s strategic partner program, and PayPal and Visa will be involved in this as one of the main tenets of their investment.

PayPal has stated that part of the rationale behind its investment in this particular fund coincides with the firm’s commitment toward making cryptocurrency more accessible and secure, whilst Visa’s executive team considers that their company is focused toward improving all methods by which money is moved, whether on the Visa network or not.

This is a major breakthrough for the entire payments ecosystem and goes hand in hand with the recent empowerment of citizens of El Salvador, who will now be able to use Bitcoin as an official means of payment alongside the US dollar, meaning that with the interest now shown by mainstream merchant services companies in cryptocurrency, the unbanked population of the world will now be able to conduct everyday transactions via normal payment channels, just as those with bank accounts do.

Until now, Visa, along with other payments processors, has toed the traditional line, being very conservative and sticking steadfastly to strict risk management protocols, and has stayed away from cryptocurrency.

These days, things are completely different. The influx of massive interest in cryptocurrency from investors as a result of recent volatility as well as the realization that the unbanked world is now becoming suddenly empowered are two major reasons for Visa and PayPal to be interesed in expanding their payment networks with cryptocurrency.

The unbanked population of the world is absolutely huge, and in the case of El Salvador, the first country to adopt Bitcoin as its official currency, that amounted to 70% of the country’s population, who will now be able to use every service that the banked population can, without having to have a bank account.

That’s the genius of today’s cryptocurrency economy.

Even in super high tech China, 225 million people have no bank account, and on a worldwide basis, 31% of all adults are without a bank account. This is too much of an opportunity for mainstream payments firms to miss.

Just three weeks ago, Visa showed its hand by demonstrating how much of a priority leveraging the opportunities presented by cryptocurrency has now become.

Gone are the days when its conservative compliance officers kept well away from cryptocurrency, these days Visa is beginning to see its enterprise-friendly virtues and has stated that opportunities are abundant.

Visa stated at that time that it has made a tremendous push into new types of payment that exist outside what it terms ‘card rails’, including Visa Direct, Push to Pay and B2B Connect, and the company considers cryptocurrencies to fall into that category.

Rather than focus solely on Bitcoin, Visa looks at two groups to categorise the cryptocurrency industry, the first being untethered currencies, and the second being cryptocurrencies backed by fiat currencies, known as stablecoins.

In keeping with most of the cryptocurrency fraternity, Visa views untethered cryptocurrency as a tradeable asset, which is encouraging indeed.

The firm rolled out a five pillar strategy relating to cryptocurrency, and now having invested in a venture capital fund to develop cryptocurrency related technology, it has literally put its money where its mouth is.

Those who never thought the day would come when Visa, alongside other merchant services companies that are often regarded as a form of ‘police’ for the digital payments sector would embrace cryptocurrency to this extent are now seeing the reality of how digital assets are an absolutely important part of not just decentralized finance that is now powering a huge part of the world, but also is a mainstay within the traditional establishment.

How times have changed….