Visa Inc. ( V Quick Quote V - Free Report) recently collaborated with the well-established U.S. blockchain technology company ConsenSys to build an infrastructure for ensuring seamless integration of central bank digital currency (CBDC) networks into traditional financial service providers.
To promote widespread adoption of CBDC, which is usually issued and regulated by a country’s monetary authority or central bank, Visa has a CBDC Payments Module in place. The module aims to ease the abovementioned integration. To explore the module's potential, the Global Crypto Advisory Practice and Digital Currency Innovation Hub teams of Visa have plans to commence working with central banks and financial institutions on pilot and prototype actual use cases from Spring 2022.
Now, by virtue of the latest partnership, Visa’s platform will derive benefits of enterprise blockchain technology following its integration into the ConsenSysCodefi CBDC sandbox (backed by the open-source protocol layer of ConsenSys Quorum).
The latest move seems to be a well-timed one considering the emergence of several digital currencies, which hold promising growth prospects amid the rising Internet penetration and availability of advanced technologies such as blockchain. Amid a rapidly growing digital economy, Visa has been striving to integrate blockchain technology with its global payments platform. The primary reason is blockchain's crucial role in conceiving new asset classes ranging from NFTs, stablecoins to CBDC. The technology paves the way for rapid adoption of digital currencies by offering tools and enhancing user experience, e.g., cards, that consumers are acquainted with to access the new assets.
Visa’s module can prove beneficial to banks and issuers processors, the existing payment rails of which can be easily integrated with CBDC networks. As a result, they are equipped to issue CBDC-linked payment cards and wallet credentials for consumers. With regard to consumers, those in possession of a CBDC-linked Visa card can integrate it with a banking app and pursue accelerated checkout experiences through a retailer’s payment terminal. Even those with a digital wallet, which contains CBDC funds and payment credentials, can opt for secure payments across 80 million merchant locations accepting Visa or its connected networks.
Visa has been prudently promoting the increased adoption of CBDC. Apart from bolstering access to financial services, the digital currency enhances the efficiency and security of transferring government disbursements directly into the digital wallets of individuals grappling with financial insecurities in a particular community. The currency also brings several unbanked individuals who need to have a mobile phone under the ambit of a flourishing digital economy.
The presence of a trusted payment facilitator like Visa, which has more than 25 digital currency wallets linked to its systems, further reinforces the belief of individuals in increased usage of crypto and digital currencies. V has been committed to promoting newer ways of money movement. The company works closely with over 60 crypto platforms. In December 2021, Visa introduced Crypto Advisory Practice to guide the financial decision-making of clients and partners inclined toward utilizing crypto products.
Similar to Visa, other companies including
Mastercard Incorporated ( MA Quick Quote MA - Free Report) , PayPal Holdings, Inc. ( PYPL Quick Quote PYPL - Free Report) and Block, Inc. ( SQ Quick Quote SQ - Free Report) resorted to numerous initiatives to capitalize on the increasing popularity of digital currencies.
Mastercard has been collaborating with cryptocurrency platforms to tap the growing number of consumers entering the crypto space. MA pursues continuous endeavors to offer seamless cryptocurrency wallets and exchange experience, which result in more consumers shifting toward crypto cards for purchasing digital assets or incurring spending. In July 2021, Mastercard collaborated with a series of crypto companies in a bid to unveil a card offering and provide seamless cryptocurrency conversion, thereby broadening the crypto ecosystem.
PayPal enables customers to trade crypto assets through its digital wallet. PYPL has an offering in place named Checkout with Crypto, which facilitates seamless online purchases utilizing cryptocurrencies. In August 2021, PayPal unveiled its cryptocurrency service in the U.K., thereby marking its foray into the country’s crypto market.
Block has made substantial investments in purchasing bitcoin (a crypto asset) over the years. The entry of SQ into the bitcoin market with the Cash App product continues to contribute significantly to the company's quarterly results. In the third quarter of 2021, Cash App produced $1.8 billion of bitcoin revenues and $42 million of bitcoin gross profit, reflecting an improvement of 11% and 29% year over year, respectively.
Shares of Visa have gained 6.7% in a year against the
industry’s decline of 13.9%. Visa currently carries a Zacks Rank #3 (Hold). You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Image Source: Zacks Investment Research
While Mastercard stock has gained 14.3% in a year, shares of PayPal and Block have lost 24.5% and 39.9%, respectivey, in the same time frame.