Investors should not ignore cryptocurrencies’ threat to incumbent payment services like Visa, Mastercard, and PayPal, according to Lisa Ellis. In a note to clients, the MoffetNathanson analyst said that emerging use-cases could pose an existential crisis in the future.
As Ludicrous as It May Sound
“Why would I ever buy coffee with bitcoin?” asked Ellis, before ensuring her clients that it is a distinct future possibility, “as ludicrous as it may sound.”
Though it may sound “ludicrous” to Ellis’ investors, the concept is fairly standard in cryptocurrency circles. In fact, work is well underway to make it happen — despite Ellis’ assurance that it is unlikely to occur soon.
As Bitcoinist recently reported, noted Bitcoin bull Tim Draper thinks everybody will be doing it in just two years time. Except him, of course, as he doesn’t intend to spend or sell any.
Furthermore, Starbucks has apparently received ‘significant’ equity in Bitcoin futures platform, Bakkt, to accept in-store bitcoin payments this year.
Improvement on FIAT
The growth of Bitcoin use in high-inflation economies is another factor of concern for the incumbents, according to Ellis:
(Cryptocurrency systems) core design characteristics — which are aimed at enabling ‘freedom of money’ — are in direct contrast to the characteristics of most traditional, private payment systems.
She suggests that the networks also need to embrace blockchain technologies or cede further ground in the cross-border payments market.
A combination of emerging use-cases, relative price-stability, and improvements such as Lightning Network implementation, are once more pushing Bitcoin’s functionality as digital cash.
Arrogance Comes Before a Bigger Fall
One of the greatest threats to private payment systems could be their own arrogance. Perhaps secure in their belief that there is no viable alternative to their services, they continue to raise processing fees. Retailers, however, can only be pushed so far and there are signs of a backlash against high fees — particularly with Visa. The successful implementation of bitcoin payment solutions could easily upend the hegemony of Visa and Mastercard.
Ellis’ advice to clients on all three companies (Visa, Mastercard, and Paypal) is to buy, but for how much longer is another question completely.