Visa tests pre-funded stablecoins for cross-border payments
The programme has the potential to eliminate a worst case scenario for clients: an underfunded account causing service delays for their end customers
[SAN FRANCISCO] Visa is testing a pilot programme that gives financial institutions, banks and remittances providers the option of using pre-funded stablecoins to make cross-boarder payments faster and more flexible without users having to tie up cash for extended periods of time.
Visa Direct, the payment network’s real-time platform, will use Circle Internet Group’s USC dollar and EURC euro-backed stablecoins for the pilot. A representative of Circle did not reply to a request for comment.
The Visa programme has the potential to eliminate a worst case scenario for clients: an underfunded account causing service delays for their end customers.
Today, a remittance company, for example, must maintain pre-funded accounts in each of the markets where it operates in preparation for customer withdrawal requests. If the company gets more requests than expected and can’t fund all of them, it runs the risk of service interruptions. If this occurs when traditional payment systems aren’t running, like during weekends, there could be days-long delays for consumers that use the service, according to Mark Nelsen, head of product for Visa’s commercial and money movement solutions.
“We’re giving this immediate ability to get money to the accounts in real time,” Nelsen said in an interview. “It’s a more efficient use of capital so you can deploy it as needed as opposed to having to deploy two or three days worth of money in one stop.”
Visa Direct is the company’s platform helping clients send money to roughly 11 billion Visa cards, bank accounts and digital wallets currently connected to the platform across 195 countries.
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The service operates behind the scenes, supporting global operations for corporations, fintechs and crypto companies that want to leverage its connections to domestic payment systems around the world.
The added support for stablecoins means clients can now fund their network of global accounts in real-time and avoid the off-hours delays associated with existing payments systems, Nelsen said.
Cross-border payments are one of the most popular use cases for stablecoins, which Visa has been integrating into its network since at least 2021. The coins are digital assets pegged to fiat currencies like the US dollar and often backed by reserves held in cash and short-term US Treasuries.
The tokens have been pitched as an alternative to traditional payment systems and even as a potential tool to cut out card networks like Visa and Mastercard, which set processing fees that often draw complaints from merchants. Both networks have moved quickly to adopt the technology and position the tokens as a complement to existing systems, rather than a threat.
Visa has to date settled more than US$225 million in stablecoin volume on its network, a growing but small fraction of the US$16 trillion total payments and cash volume on the network in fiscal 2024.
Other use cases for Visa Direct include paying out gig workers globally or allowing crypto exchanges offer an instant withdraw option for customers.
The service is a cornerstone of Visa’s strategy to move beyond its trademark card business facilitating consumer payments and into capturing money flows like business-to-business payments.
However, the business is facing steep competition for the lucrative business payments from banks like JPMorgan Chase that are developing their own blockchain-based products to offer faster options for business clients. BLOOMBERG
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