For the $1 trillion Visa and Mastercard duopoly, stablecoins are a problem. Unless these two learn to adapt, pro-crypto regulation and aggressive new entrants will begin to put them in a more vulnerable position than ever. The Credit Card Competition Act (CCCA), if passed, would require large banks to give merchants a choice of at least one additional network — besides Visa or Mastercard, which they’re locked into today — to process credit card transactions. This would weaken Visa and Mastercard’s pricing power, and, importantly, be a golden opening for a stablecoin network to compete via lower fees. [Caveat: the CCCA (sadly) only has a 3% chance of passing in the Senate and 9% in the House, so while it’d be nice if it passes, it’s currently unlikely.]

Right now, Visa and Mastercard charge merchants egregious 2 to 3% swipe fees, typically their second highest cost after payroll. Sadly, smaller merchants are disproportionately hit by these swipe fees. Enterprise giants like Walmart have the pull to negotiate, so they’re able to get better rates than mom-and-pop shops, which are locked into Visa and Mastercard. This is partly why Visa and Mastercard’s profit margins are each higher than 50%: small businesses have no choice but to accept Visa and Mastercard since they control 80% of the credit card market. Put simply, merchants just can’t afford to move away from these two — it’s “classic monopolistic [duopolistic] behavior” (Senator Josh Hawley).

A stablecoin network could drop those swipe fees to essentially zero. Merchants hate swipe fees — rightfully so — and if they could opt for a lower-fee network that wouldn’t limit their TAM, they’d switch in a heartbeat.