Forget bitcoin, card firms should embrace stablecoin payments - Gartner
Research house Gartner has poured cold water on Visa’s recent move to support bitcoin trading on its network, arguing that the real revolution in payments would see centralised financial companies support stablecoin transactions on blockchains.
Earlier this week Visa outlined plans for the first pilot of its new suite of crypto APIs, following other industry players such as PayPal and Square in embracing the digital currency movement.
Gartner analyst Avivah Litan says that the move is welcome, and increase the “technical rails between consumers, businesses and blockchains, and help prepare the transition to future payment infrastructure”.
However, in a blog, she also notes that it is “hardly a revolution”. Having centralised financial companies that earn revenues by charging transaction fees at the centre of crypto goes against the peer-to-peer ideals of blockchain payments.
“Potential users are left to wonder if, in the future, they will have to pay these centralised services additional transaction fees for moving cryptocurrency across peer-to-peer blockchain networks, defeating the promise of blockchain,” writes Litan.
Her answer to this problem is for card brands and other established players to provide the on and off ramps for payors and payees using stablecoins, without being involved in the actual payment that would occur on the blockchain.
This would mean Visa and its peers would not get a transaction fee but would make money from issuers and acquirers using services such as risk management, onboarding and protections for balances.
Concludes Litan: “The question remains: will these centralised financial services companies go forward in line with the spirit of blockchain peer to peer payments at the risk of cannibalizing their existing central-clearing house based-revenue streams? The answer will depend on whether or not these firms have any practical choice.”
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TipRanks
Let’s talk about growth. With corona receding, politics growing less exciting, and a new year ahead, investors are getting optimistic – and that means there’s a hunt for stocks that will bring in strong returns. In other words, growth stocks. In a recent interview, Jan Hatzius, chief economist at investment giant Goldman Sachs, said that he sees GDP growth in 2Q21 hitting as high as 10%. In an environment like that, most stocks are going to show a growth trend. Now, we all know that past performance won’t guarantee future results. Still, the best place to start looking for tomorrow’s high-growth stocks is among yesterday’s winners. Bearing this in mind, we set out to find stocks flagged as exciting growth plays by Wall Street. Using TipRanks’ database, we locked in on three analyst-backed names that have already notched impressive gains and boast solid growth narratives for the long-term. 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He is impressed by the growth in firearm and ammunition sales, and by the price increase for products in both the outdoor goods and the shooting sports divisions. “Given our expectation that the increased industry participation numbers for both outdoor products and shooting sports during the pandemic will represent an incremental tailwind for VSTO in the coming years beyond the impressive production visibility that has been created by depleted channel inventory levels, we continue to see an attractive set-up for baseline growth,” Wold commented. Overall, Wold is bullish on the stock and rates it a Buy, with a $41 price target. This figure indicates room for 27% upside in the coming year. (To watch Wold’s track record, click here) Vista is another company with a unanimous Strong Buy consensus rating. That rating is based on 9 recent reviews, all to Buy. VSTO shares have an average price target of $36.78, which gives an upside of 14% from the trading price of $32.15. (See VSTO stock analysis on TipRanks) Textainer Group Holdings (TGH) You might not think about the ubiquitous cargo container, but these deceptively simple metal boxes have changed the face of bulk transport since their breakout proliferation in the 1960s. These containers make it easy to organize, load, ship, and track vast amounts of cargo, and are especially valuable for their ease of switching; containers can be quickly loaded on or switched between ships, trains, and trucks. Textainer is a billion-dollar company that buys, owns, and leases shipping containers for the cargo industry. The company has over 250 customers, and boasts a fleet of 3 million twenty-foot equivalent units (TEUs). Textainer is also a major reseller of used containers, and operates from 500 depots around the world. Even during the corona pandemic, when international trading routes and patterns were badly disrupted, and the quarterly revenues were down year-over-year, Textainer saw share gains. The company’s stock soared 110% over the past 12 months. The bulk of these gains have come in the past six months, as economies – and trading patterns – have begun to reopen. Looking at Textainer for B. Riley, analyst Daniel Day is deeply impressed. He sees this company as the lowest priced among its peer group, with a strong market share in a competitive industry. Day rates TGH a Buy, and his $31 price target suggests it has room for 57% growth ahead of it. In support of this bullish stance, Day writes, in part, “We believe that TGH is an underfollowed, misunderstood name that is ideal for the portfolio of a deep value investor looking for cash flow–generative names trading at a steep discount to intrinsic value. With new container prices at multiyear highs amid a resurgence in container shipping, we expect upcoming earnings results to be positive catalyst events for TGH…” Some stocks fly under the radar, and TGH is one of those. 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Credit Card Companies Should Offer Stablecoin Payments or Be Left Behind: Gartner
Centralized payment companies such as Visa, Mastercard and PayPal will need to adapt if they are to survive the potential demand for blockchain-based stablecoin payments, according to research firm Gartner.
In a Thursday blog post, Gartner notes that, while new bitcoin (BTC) offerings from such firms are helping to prepare the transition to a future payment infrastructure, their revenue is based on charging transaction fees for clearing and settlement.
The fee strategy, which sit at odds with blockchain’s peer-to-peer model, could be the very thing that sees these firms fall behind the competition from stablecoin payment networks, per the post penned by Avivah Litan, distinguished VP analyst at Gartner.
Litan described such firms as “centralized decentralized finance” (CeDeFi) – in which centralized, mainstream firms with big bitcoin holdings bring innovation to the DeFi space and, conversely, adopt DeFi’s biggest apps.
But Litan points out that customers of these types of services are likely wondering if they will be obliged to pay centralized service fees for moving their cryptocurrency along the blockchain in the near future, defeating the technology’s initial promise.
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“Companies we speak to are justifiably skeptical of these services,” Litan wrote. “After all, the revolution of blockchain payments is that they execute peer-to-peer and eliminate central intermediaries and associated bank fees.”
However, the author added Gartner has yet to see a range of offerings from the crypto space for viable stablecoin payments, pointing to a lack of easily accessible applications and fees lower than are currently on offer from card networks or firms like Square and PayPal.
Litan said there’s potential for card firms to provide a range of as-yet-unseen offerings, such as transparent real-time stablecoin payments on the blockchain tied to underlying information regarding a given transaction, and protections for funds backing stablecoin sitting in partner bank accounts.
Card companies could provide the gateways for payors and payees and add functionality, according to the post.
“The card brands could still earn revenues from on and off ramp value-added services, and from interest on the reserves underlying the stablecoins,” Litan said.
By 2022, CeDeFi could be ready for enterprise adoption if the regulatory guidance is present, the research analyst predicted.
But, should the legacy payment companies fail to keep pace with the likes of fiat on/off ramps, such as fast-moving cryptocurrency exchanges like Binance and Gemini, other firms are going to step forward.