According to a recent research paper published by the Santander Bank, the rise of bitcoin, and its underlying technology, the blockchain, can end up having a strong impact on the card market, by hurting both acquirers and issuer banks, but benefitting credit and debit card emitters such as MasterCard and Visa.
The paper, which is mostly focused on the Brazilian market, warns that the region’s largest debit and credit card operator, Cielo, will be negatively affected if bitcoin adoption grows. In fact, researchers at the Santander Bank believe that the entire business models of both Cielo and other similar firms will be challenged, due to numerous merchant discount rates and the POS revenues.
According to the paper, banks which issue credit cards will have their total revenues threatened, whereas small-scale card suppliers and companies in charge with POS manufacturing will face financial issues, due to a lower number of cards put into circulation. This is understandable, yet it will take a while until bitcoin takes over, and eliminates traditional credit and debit cards once and for all. In contrast, the Santander Bank believes that bigger card emitters such as Visa and MasterCard will actually benefit by implementing blockchain technology, as they’ll face lower transactions, back-end and IT costs.
In the report, the researchers continued by noting that Visa alongside with MasterCard are already exploring the area, and working with various companies to find ways of adapting their solutions to the future of the financial market. The researchers involved with drafting the report believe that new implementations from credit card manufacturers will likely threaten the control that interbank payment networks such as SWIFT have at this moment in time.
Exchanges will probably be less affected, as worldwide bitcoin adoption will likely increase trading volume, and hence revenues. However, due to the current state of digital currencies, most exchanges will need to take longer to fully process and clear payments, to ensure their legality. Banks are also likely to benefit from the adoption of blockchain technology, as they will eliminate the costly transfers, and trading between two or more parties.
In the report, it is stated that: "We believe the blockchain concept has the potential to redefine money transactions in the banking world, taking advantage of the power of decentralized computer networks to eliminate difficult, time-consuming and costly trading among banks. IT, transaction costs, the banks’ huge back-offices, capital requirements – all of those could change in a material way, in our view”.
Based on everything that has been outlined so far, what do you personally think about the outcomes of the detailed-research project carried out by Santander? Do you agree that bitcoin and the blockchain network will affect small card emitters and, POS companies and credit card issuers? Is this a sign that the financial market should begin adapting to the future reality? Let us know your thoughts in the comment section below.