Visa Expands Stablecoin Settlement Capabilities To Merchant Acquirers

September 7, 2023
In another vote of confidence for the use of crypto and blockchain in payments, Visa has expanded its stablecoin settlement capabilities to merchant acquirers Worldpay and Nuvei.

In another vote of confidence for the use of crypto and blockchain in payments, Visa has expanded its stablecoin settlement capabilities to merchant acquirers Worldpay and Nuvei.

Under new pilot schemes announced this week, Worldpay and Nuvei will act as merchant acquirers for transactions settled in USDC, the US dollar stablecoin issued by Circle.

In a statement, Visa said the new pilots will be aimed at merchants that prefer to receive stablecoins instead of traditional fiat currencies when accepting card payments.

Using its own Circle account, Visa can manage settlement payouts in USDC to Worldpay and Nuvei, who can then route these payments in USDC to their end merchants.

According to Visa, there are a “growing number” of merchants globally who may prefer to get paid in stablecoins. These include crypto-native merchants - such as crypto exchanges, blockchain gaming platforms and non-fungible token (NFT) marketplaces - but also traditional merchants that generate high volumes of cross-border payments.

In 2021, for example, Visa partnered with Circle and to pilot USDC payouts to sellers on Clothia, a global marketplace used by designers in 24 countries.

According to Visa, the pilot allowed Clothia to reduce its operational costs while providing immediate payouts to designers.

Jim Johnson, president of Worldpay Merchant Solutions at FIS, said that using USDC settlements will allow Worldpay to bring more of its treasury operations in house and will give merchants more choices for receiving funds.

“Diversifying funding options and increasing flexibility is critical to serving the changing needs of global merchants in today’s rapidly evolving commerce landscape,” he said.

A need for speed

To power the new pilots with Worldpay and Nuvei, Visa also announced that it will be using the Solana blockchain as a USDC settlement layer.

Previously, Visa’s use of USDC settlements had focused on the Ethereum blockchain, but due to speed and throughput limitations, a move to Solana was seen as necessary for scaling up.

“As Visa looked to expand this capability to additional clients, there has been significant demand to leverage newer, high-performance blockchains that can send and receive stablecoins with higher speed and lower costs,” said Visa.

When USDC was launched in 2018, it ran on the Ethereum blockchain only, but in the years since, Circle has launched the stablecoin on ten blockchains in total, including Solana in 2021.

The Solana blockchain processes 400 transactions per second (TPS) on average, and this can surge to more than 2,000 TPS during periods of peak demand.

Solana’s block time — the time it takes to verify all transactions within one block, and then add the finished block to the blockchain — is 400 milliseconds.

In comparison, Etherum’s block time is currently about 12 seconds, while Bitcoin’s is about ten minutes.

By selecting Solana, Visa said it is among the first “major payment companies” to directly use the Solana blockchain for live settlement payments between clients.

The ‘simple’ digital money

In a blog post published one day after the Wolrdpay and Nuvei announcement, Cuy Sheffield, Visa’s head of crypto, said that blockchains are entering their “broadband era”.

This, he argued, will be a period of crystallising use cases, increased network efficiency and rapid improvements in user experience.

“Going forward, we imagine a future where Visa’s network of networks involves more than just multiple currencies and bank settlement rails, but also multiple blockchain networks, stablecoins, and CBDCs or tokenised deposits,” he said.

“We expect traditional fiat and legacy settlement rails to co-exist with tokenised fiat running over global 24/7 real-time blockchain networks for a long time.”

Surabhi Gawde, web3 and metaverse lead at management consultancy Capgemini Invent, shares Sheffield’s optimism for the use of stablecoins in a retail payments context.

For many use cases, she told Vixio, stablecoins already provide the simplest and most efficient form of digital money.

“Unlike a wire transfer, it doesn’t cost $50 to send USDC across borders, and merchants won’t get charged 2.9 percent fees like they do on credit card payments,” she said.

Harvey Li, head of go-to-market at Centrifuge, an institutional crypto credit platform, and founder of the Crypto Adoption Curve podcast, also said the benefits for merchants are clear.

“For traditional merchants, the appeal is faster settlements,” he told Vixio. “They can get paid by Worldpay or Nuvei in minutes, if not seconds in USDC, compared to weeks in USD.”

Referring to the launch of PayPal’s stablecoin, announced last month, Gawde noted that Visa is not the only major payments network to have seen the potential of blockchain.

“By creating its own stablecoin, it signals that any entity large enough and sound enough to create digital format of a currency backed by deposits, cash equivalents and treasuries can be used as yet another money format,” she said.

The entry of major networks such as Visa, Mastercard and PayPal is also key to ensuring confidence in the infrastructure that underpins these new forms of value transfer, which in turn will attract larger institutions to the arena.

“Visa is taking the conversation from crypto debates and regulatory uncertainty to actual business utility in much wider circles, including among merchant acquirers, which touch all sectors,” she said.

As this process continues, Gawde said payment firms that ignore the trend will be at risk of losing both revenue and customers.

“The risks include loss of merchant fees and loss of merchants to new financial infrastructures,” she said.

“Therefore, innovation-focused entities across banking, payments and even non-financial service sectors are looking to state their presence and relevance with these new market entries.”

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