This week, Visa announced a new pilot to send USDC, the world's second-biggest stablecoin by market capitalisation, to merchants via the Solana blockchain. Following a similar program with Crypto.com earlier this year, the new pilot is another significant step by Visa to modernise cross-border payment services.
Currently, Visa enables card users to make near-instant payments at merchants by simply tapping or swiping their cards. Behind this simple process, what users don't see is a series of steps at the back-end that make it happen. Visa explains this complicated process below:
the funds used for their (note: card users') purchase need to move between their bank (the issuer) and the merchant’s bank (the acquirer). This is where Visa’s treasury and settlement systems enable the clearing, settlement and movement of billions in transactions a day, making sure the correct amount in the preferred currency is received from the issuer and sent to the acquirer.
This process happens between nearly 15,000 financial institutions and across more than 25 currencies globally.
Visa is now using stablecoins and blockchains to improve this process. Cuy Sheffield, Head of Crypto at Visa said:
By leveraging stablecoins like USDC and global blockchain networks like Solana and Ethereum, we're helping to improve the speed of cross-border settlement and providing a modern option for our clients to easily send or receive funds from Visa’s treasury.
Previous Visa pilot programs
This is not Visa's first stablecoins initiative. In 2021, Visa began testing how USDC could be used inside its treasury operations - making it one of the first major payments networks to test stablecoin settlement on the issuance side.
This work led to a successful pilot with Crypto.com this year, leveraging USDC and the Ethereum blockchain to receive payments from Crypto.com for cross-border volume on their live card program in Australia.
Before that pilot, settlement for cross-border purchases made on Crypto.com Visa cards required a days-long currency conversion process and costly international wire transfers. Now, Crypto.com can send USDC cross-border over the Ethereum blockchain directly to the Visa treasury, which helps reduce the time and complexity of international wire transfers.
Crypto.com now uses USDC to fulfill its settlement obligations on the Visa card in Australia and intends to roll out this capability in other markets.
Expanded merchant pilot
The new pilot program enables Visa to pay USDC to merchant acquirers such as Worldpay and Nuvei, who can then route USDC payments to their end merchants worldwide. Worldpay and Nuvei serve merchants from a diverse range of sectors, including crypto on-ramp providers, games, and NFT marketplaces and others in the blockchain and crypto economy. These end merchants may prefer to receive stablecoins over traditional fiat currencies for the card payments they accept. They may also receive payments faster via on-chain settlement of USDC.
Visa has said it chose to add support for Solana as a high performance blockchain because of Solana's higher speed and lower cost. This makes Visa one of the first major payments companies to directly use Solana for live settlement payments between its customers. The Solana blockchain sees 400 millisecond block times, averages 400 transactions per second (TPS) and typically surges to more than 2K TPS across a variety of use cases during periods of peak demand.
Good news for USDC
Jeremy Allaire, co-founder and CEO of Circle, the company that issues the USDC stablecoin, said
We are excited about the USDC use cases Visa and its partners are driving to create fundamental blockchain innovation...Expanding the pilot exemplifies how pairing USDC with Visa’s innovation opens up the future of payments, commerce and financial applications.
Future of payment?
Visa said it is eyeing an increasingly digital financial landscape in the future. It is forging ahead with new partnerships and embracing the innovative potential of digital currencies. Visa’s work with Worldpay and Nuvei represents a significant stride in this direction.
Visa is certainly not alone in adopting cryptocurrencies for use in traditional electronic payments. Mastercard has also revealed a new suite of crypto offerings, most recently it’s so-called Multi Token Network. In August, PayPal launched its own stablecoin in partnership with Paxos in a push into crypto payments.
These recent crypto plays by payment industry giants show that faster payments remains a strong use case for cryptocurrency and blockchain. As Philip Fayer, Chair and CEO of Nuvei said,
Stablecoins like USDC are cutting edge payments technology that can enable online businesses around the world to accelerate their growth...Optimizing cross-border transactions is only one use case where stablecoins can benefit businesses.