Bursar Bulletin: Did Coinbase and Shopify just kill Visa and Mastercard?
Coinbase announced it's new stablecoin-based e-commerce payment solution, and it could spell huge problems for card providers. Plus Tesla launches robotaxis in Austin.
Alright, alright, alright - I have been going on about stablecoins and payments for a while, but we finally have a mainstream product launch to discuss!
Coinbase has officially launched Coinbase Payments, a full-stack stablecoin payment system built around USD Coin (USDC) and designed for seamless e‑commerce integration. Their first launch partner is a huge one - Shopify - who powers over 2.06 million merchants across 175 countries (with ~10% e-commerce share in the US).
SUPRISE - I don’t totally think this is necessary, and certainly don’t think it will be the all-transforming thing I’m sure Coinbase hopes it will be.
Read on to find out why…
What happened?
The launch and integration with Shopify Payments - powered by Coinbase and Stripe -now enables merchants to accept USDC on the Base L2 network with no extra setup, instant confirmations, near-zero fees (~$0.01 or less), global payments, and smart-contract features like authorization/capture and refunds.
To put it more simply - they can now do everything cards can do, but in a cheaper more standardized way that doesn’t rely on fairly archaic Visa/Mastercard infrastructure.
Early access began June 12, with full rollout expected across millions of stores and support for Shop Pay and guest checkouts.
Why would merchants like/use this?
There are really three main reasons I can see that this type of thing is beneficial to merchants, and would lead to deeper adoption:
Lower cost.
A lot of e-commerce merchants operate on very thin margins (particularly those selling lower cost products). Current payment networks like cards and even Paypal can take up to 4-5% of each sale as a payment fee, which in some cases can be crippling. Coinbase Payments claims to charge less than a penny per transaction.
Every time you tap a card, there are multiple players that take fees:
Visa and Mastercard take 0.15-0.20% (“network fees”)
Stripe, Fiserv, etc. take 0.30-0.50% (“processing fees”)
1.5-3.0% goes to card issuers - usually banks - (“interchange fee”)
Last year this netted these folks a lot of money; Visa & Mastercard: ~$20 billion, Processors: $30 billion, Card Issuers: $140+ billion.
We even see this in Higher Education. My guess is the vast majority of your University’s pass on that cost of card fees to students because it is too big a cost - I have actually even seen some Universities stop accepting card payments for this reason.
Cashflow and Liquidity.
Merchants often don’t see their money for days (or even weeks if there are bank holidays involved) when a customer makes a transaction. This can be a problem because that same merchant needs to give the product or service immediately to the customer.
Coinbase payments offers instant settlement via their wallet-to-wallet mechanisms, which could be beneficial from a cash flow management perspective.
However, the caveat here is that it may take time to actually redeem the stablecoin value a merchant receives into actual cash at bank - this is the part that is still a little unclear and not well defined (ie the off-ramp).
Optionality.
We hear this a lot on Higher Ed but it applies everywhere - merchants want to give customers as many options as possible (assuming it can be a positive customer/merchant experience). If a large enough cohort of customers do want to pay using USDC (the type of stablecoin), then merchants will want to ‘meet customers where they are’.
How does it compare with cards?
My guess at what will actually happen here…
The crypto-enthusiast and stablecoin optimist thought here is that this will spell the end of Visa and Mastercard - and there is data to argue that. Visa and Mastercard stocks plunged ~5% on concerns the stablecoin wave may undercut traditional rails. In 2024 alone, stablecoin transactions reached $27 trillion, outpacing Visa and Mastercard transaction volumes combined
However, I think that line of thinking is overblown for domestic payment use cases.
When a new technology comes into play, there is always discussion about whether it is a solution looking for a problem, or if there is actually a problem whether or not this new technology fixes and is well suited for.
My read on this here is two-fold; There is a problem - credit and debit card fees (interchange) are crazy high, and cost merchants, and therefore consumers, billions of dollars a year. BUT this problem doesn’t require this solution.
In reality, I do think a few things will happen here:
Pressure on payment network fees.
I believe this will shine fresh light on the fees charged by payment and card networks. New competition always drives down fees charged to users, which ultimately is a good thing. This, however, is less a technology thing, and more a competition/market dynamics thing.
A good example of how this played out in other industries is how Robinhood came into the brokerage industry and pushed everyone to $0 dollar trading. That wasn’t because of new technology, it was because a new player came in that wasn’t protecting old revenue streams and shook things up.
Increased awareness of ‘Pay by Bank’.
Cheaper, faster, more efficient - all sounds really good. It also sounds exactly like the benefits FedNow is enabling for existing US banking infrastructure.
This is where I think this type of technology is a solution in search of a problem - because FedNow, a standard, US government sanctioned/adopted payment network already exists. It doesn’t require anyone to completely rebuild rails, or need customers to adopt a new payment method - they can simply use their current bank accounts.
FedNow processed nearly $50BN in payments in Q1, up 140% from Q4’24, and up 154,570% Year on Year.
All-in-all, I think this is an exciting time for payments. We are (finally) seeing cost pressure being put on existing payment networks, and new innovations (both public and private) that are giving consumers access to a broader, cheaper and more accessible array of payment options. All good things in my book - and we at Backpack are excited to be building on top of all of these.
What else happened this week?
If you are in Austin, be on the lookout for the new Tesla robotaxis that hit the road last weekend. Will be interesting to see how/if they make ground on Waymo. Read more here.
The US Senate passed the GENIUS Act, marking a significant step forward in advancing stablecoin legislation. Read more here.
See everyone next week!
Cal