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Payment giants are driving crypto adoption by partnering with startups

September 4, 2020

Financial services giants Visa and Mastercard have shown increased interest in the multi-billion dollar digital payments industry through their recent acquisitions of innovative fintechs.

In January of this year Visa acquired the fintech company Plaid for $ 5.3 billion. The San Francisco-based company enables the exchange of financial information between various fintech applications such as Venmo and Chime and thus supports more than 2,000 financial institutions. Therefore, the acquisition could strengthen Plaid’s global transfer capabilities.

Mastercard has also made some major acquisitions in the fintech sector. In June of this year, the payment giant announced plans to acquire financial data aggregation company Finicity for $ 825 million. Mastercard’s announcement said that the introduction of Finicity technology will strengthen the company’s open banking platform and provide customers with more options for financial services.

Payment giants are driving crypto adoption by partnering with startupsPayment giants are driving crypto adoption by partnering with startups

Alex Tapscott, author of the book Financial Services Revolution, told Cointelegraph so Visa and Mastercard have benefited greatly from the constant migration from cash to digital payments, an idea fueled by the COVID-19 pandemic.::

“This has been accelerated by increased online spending disrupted by the pandemic. So it naturally makes sense for Visa and Mastercard to acquire companies like Plaid (which was before the pandemic) to defend their dominant position by serving them Making more available Understanding consumption habits “.

Promote acceptance

While both Visa and Mastercard have focused on the beginnings of traditional paymentsIt’s interesting that these financial services giants are also showing an interest in the crypto space. This should come as no surprise, according to Tapscott, as he found that the future of crypto-asset funding is starting to take hold. “”I think Visa and Mastercard also recognize that the future of finance is not the “digital background image” of traditional fintechs, but a profound structural change made possible by crypto assets.“said.

In addition, financial services giants could lay the foundation for the future of cryptocurrency adoption. For example, Visa recently partnered with a Bitcoin Lightning Network startup called LastBit through its Fast Track program, which enables payment in US dollars using Bitcoin (BTC).

Prashanth Balasubramanian, CEO and Founder of LastBit, told Cointelegraph so The project was started with the aim of putting Bitcoin in the hands of as many people as possible. He noted that partnering with large companies like Visa is essential for the company to achieve this:

“We are aware that the FinTech sector is highly regulated, technical and complex and has high market entry barriers not only from a capital, but also from a business point of view. Visa’s experience here helps us to overcome these barriers and make them a reality Our vision in ways that we couldn’t possibly create on our own. “

According to Balasubramanian LastBit spent about six months looking for a bank that the startup could use to open a corporate account to deposit escrow checks from investors. “That was just because the word ‘Bitcoin’ was on our product and website.”Approved.

As a Balasubramanian He believes it is unrealistic to push bitcoin adoption without the support of big players like Visa. He understands the value a major financial services giant can bring to a crypto startup.

More established cryptocurrency companies are also increasingly aware of the benefits that partnerships with Visa and Mastercard can bring to the industry. Bill Zielke, chief marketing officer at BitPay, one of the largest providers of on-chain payments, told Cointelegraph that financial services giants are openly welcoming changes in the payments industry through new partnerships:

“Payments are going through a massive transformation and digital payments are one of the fastest growing areas. Visa and Mastercard have announced partnerships with major on-chain payment companies like BitPay and Coinbase.”

In practice, this means that customers with Mastercard-backed plastic crypto cards can easily convert crypto to fiat to spend wherever a Mastercard debit card is accepted. The concept was groundbreaking in terms of introducing cryptocurrencies into the traditional world. To put this in perspective, BitPay claims on its website that it processed over 100,000 cryptocurrency transactions per month in 2020.

Mastercard has also recognized the value of participating in the growth of digital currency. In July of this year, the payment provider announced the expansion of its cryptocurrency card program. Mastercard mentioned that all cryptocurrency card partners are invited to join the company’s Accelerate program to innovate faster.

Forgot the roots?

While partnerships between financial services giants and cryptocurrency companies promise growth, some may wonder if these relationships violate the foundation on which Bitcoin and other cryptocurrencies were built. After all, the value of Bitcoin is that it is decentralized and therefore not regulated by government agencies.

JP Thieriot, CEO of Uphold, a cryptocurrency payment platform, told Cointelegraph that it is a delicate balancing act to seize the opportunities of digital currencies and app-based financial services while protecting the rails. controlled by the banks that keep cryptocurrencies on track. “”Once a fintech has been acquired by a company like Visa or Mastercard, it is of course subject to the same restrictions“said.

Although this can be so Balasubramanian remains upbeat, noting that large payment networks looking to innovate cryptocurrency companies are slowly but surely making things easier.::

“Previously, a massive hierarchical chain of program managers, publishers, and card processors blocked the doors to innovation in Bitcoin-to-fiat payment technologies. From the very beginning, we’ve seen this landscape change after a series of conversations with literally various fintech players that end with “No Bitcoin Firms Allowed” or begin to “Let’s Build Something That Can Be Used With Bitcoin”.

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