Big Retail Stablecoins May Be Game-Changers or Simply Gift Cards on the Blockchain

Big Retail’s commerce ecosystems may prove to be fertile ground for new payment methods, particularly proprietary stablecoins.

The web woven between platforms, businesses and customers would seem a natural fit for those coins, moving instantly between buyers and sellers, with what proponents have said is the liquidity as cash, because the coins are backed by dollar-denominated reserves and short-term U.S. Treasurys.

PayPal is an example of how the coins themselves can be given some of the hallmarks of traditional payment methods, chiefly the credit cards with which they compete. As PYMNTS reported in April, PayPal Holdings is targeting a summer debut of a rewards program that will allow users to earn rewards on holdings of the PayPal USD (PYUSD) stablecoin in their PayPal or Venmo wallets. Users will be able to immediately use the rewards to send to other PayPal or Venmo users, fund international transfers, exchange for fiat, convert to other cryptocurrencies or make purchases at merchants with PayPal Checkout. Now Amazon and Walmart are reportedly mulling issuing their own stablecoins.

We’ve come a long way since the days of Facebook Credits, which launched in 2009 with an alpha version. Back then, the virtual currency was tied to in-app purchases.  But the effort fizzled, and was shuttered in 2012.

Now, more than a decade later, the idea of using digital-only holdings in ways that bypass the mainstream rails is becoming more mainstream. As PYMNTS Intelligence found in this 2022 report, a majority of tech-savvy consumers had used crypto payment options; 26% said they were “extremely” interested in using crypto at merchants offering rewards or discounts when using those payment methods. 

For the retailers themselves, the lure of saving billions of dollars of interchange and processing fees is and would be significant. It’s hard to determine just how much that might be: Overall (and not just for these retailers), interchange fees totaled more than $160 billion in 2022.  Amazon stated in its most recent report with the SEC that processing fees are included in fulfillment costs, which as part of operating expenses, totaled $98.5 billion last year. The attendant shift away from card-based payments implied last week’s news sent Mastercard and Visa’s stocks down by mid-single-digit percentage points.

But there are challenges in setting up a new payments shift. “Things get more complex when stablecoins are used not just to settle funds, but as the actual medium of consumer payments at checkout,” PYMNTS wrote last week, adding, “Unlike traditional card networks, where dispute resolution is standardized and liability is contractually shared, stablecoin rails often lack defined rulesets.” Stablecoins are still a work in progress, particularly on the regulatory front.

Stablecoins also demand a reserve; Amazon and Walmart would have to establish a combination of assets, including dollars, short-dated Treasurys and perhaps commercial paper, to create a one-to-one basis for the coins as they run on a blockchain.

For the consumers themselves, holding a wealth of stablecoins in a digital wallet to transact may be perceived as just an update to prepaid cards and gift cards. They’re akin to money tied up, waiting to be spent within the confines of a commerce ecosystems. In that scenario, it may be the case that consumers hew to credit cards, which can be paid down over time and have rewards attached to them; transactions are also reversible and don’t need dedicated wallets. Time will tell if stablecoins will prove to be a game-changer for eCommerce.

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