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Consumers and merchants were supposed to be the silver bullet driving scalable digital asset adoption. The cryptocurrency industry is mature enough for that to have already happened by now, and it hasn’t.
However, news from Mastercard and SoFi Technologies announced Tuesday (Sept. 22) showed that the FinTech and payments industry isn’t giving up on digital assets and stablecoins. The two companies are now using stablecoin settlement across SoFi Bank, N.A.’s debit and credit card program, with SoFi Bank migrating its entire $25 billion card program to stablecoin settlement of transactions. The program uses SoFiUSD, a U.S. dollar-backed stablecoin issued by SoFi Bank, together with Mastercard’s global payments network.
SoFi’s launch wasn’t alone this week, either. Thredd announced Wednesday (Sept. 23) that it is expanding its issuer processing platform to include stablecoin-powered money movement capabilities, with the initial rollout centered on supporting B2B and B2B2B applications, such as stablecoin-backed card programs, cross-border payouts, global treasury flows and on-chain settlement.
Taken together, the marketplace news reveals that, rather than relying on consumer adoption, the financial services space is now testing whether the bigger blockchain opportunity is to leave the payment experience untouched and replace the last-mile infrastructure after authorization but before final settlement.
Take that one level further, and stablecoins start looking less like competitors to cards and more like competitors to some of the correspondent banking, prefunding, treasury and settlement machinery underneath cards.
Read also: Why Stablecoins Are a Money Story, Not a Consumer Story
Stablecoins Don’t Need to Replace Credit Cards to Disrupt Payments
Payments technologies typically face an adoption problem before they face a technology problem.
The June installment of PYMNTS Intelligence’s Credit Union Tracker Series, “The Wallet Effect: How Credit Unions Can Close the Digital Currency Access Gap,” a collaboration with Velera, revealed that stablecoin awareness falls short for 70% of credit union members.
A new payment method needs consumers willing to use it, merchants willing to accept it and financial institutions willing to support it. These dependencies have helped make payments unusually resistant to disruption.
But many of the stablecoin models being brought to market can sidestep that challenge. SoFi, for example, now has a nationally chartered bank that can issue the stablecoin, a technology platform serving other financial institutions, and Mastercard providing connectivity into established global payment infrastructure, an unusual vertical stack.
Mastercard Chief Financial Officer Ling Hai said Sept. 10 that stablecoin and digital asset infrastructure is an opportunity for growth and that Mastercard is embedding stablecoin orchestration and white-label wallet capabilities into its payments stack.
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Consumers still use cards. Merchants don’t need to hold SoFiUSD or build blockchain infrastructure. Mastercard remains the network connecting participants. The potentially disruptive piece, the asset used to settle obligations after the consumer has already paid, happens deeper in the stack. The important metrics become less about wallets and tokens outstanding and more about settlement volume, liquidity requirements, reconciliation costs and how much capital institutions must maintain around conventional settlement windows.
See also: What Stablecoins Can Learn From the $12 Trillion Repo Market
The Problem for CFOs Is That Digital Dollars Don’t Keep Bankers’ Hours
Crypto markets have traditionally emphasized supply. How many tokens exist? What is their market capitalization? How much money is sitting in them?
Payments infrastructure is ultimately about velocity. A bank-issued stablecoin could theoretically maintain a relatively modest supply while repeatedly settling enormous transaction volumes. If the same digital dollars circulate through card settlement, treasury transfers and cross-border payments, the economically important number may become how much money the token moves, not how much money it represents at any particular moment.
If stablecoins allow institutions to move money economically at 2 a.m. Sunday, businesses may gain faster access to cash and potentially reduce prefunding or trapped liquidity.
But their finance operations may also need to operate on the same clock. Stablecoins could therefore eliminate one working capital constraint while creating the new operational requirement of managing money that never clocks out.
That is what makes SoFi’s $25 billion migration more interesting than its headline suggests. The experiment isn’t simply testing whether blockchain can process card settlement. The industry already knows blockchain networks can move digital assets.
The unanswered question is whether tokenized money can outperform existing settlement infrastructure without requiring consumers, merchants and financial institutions to rebuild everything around it.
For all PYMNTS digital transformation and B2B coverage, subscribe to the daily digital transformation and B2B newsletters.
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