- Chamat Palihpetiya said Visa and MasterCard will lose out on Web3-based payment projects in 2022.
- He said both companies were “a completely contrived and needless duopoly”.
- He cited Amazon’s decision to ban Visa credit cards in the UK due to high transaction fees as one of the reasons for his opinion.
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Billionaire investor Chamath Palihapitya has boldly predicted that Visa and Mastercard, two of the largest payment processors, will be dropped with emerging blockchain and DeFi projects in 2022.
“The biggest loss to my business for 2022 is Visa, MasterCard, traditional payment rails, and the entire ecosystem around them,” he said on an episode of “All-In Podcast” released Wednesday.
For him, the old payment systems in use around the world are a “completely contrived and needless binary monopoly”.
Palihapitya, a former Facebook executive who manages venture capital fund Social Capital, has shared what he believes will be the “most profitable mainstream business” of his life in the coming year.
“Shortly on these companies and basically anyone who lives off a 2 or 3% (transaction) tax, stay short of well-thought-out, Web3 crypto projects that rebuild the payments infrastructure in a completely decentralized way,” he said.
Without being specific, he predicted at the same time that “a lot of these crypto spoof projects will go to zero.”
He added, “If you read the white papers of these crypto projects, and compile a framework systematically, I think you can be long and Visa/Mastercard can be short, because I think that is the height of their market cap.”
Spread trading is a market order in which a trader simultaneously buys one security and sells a related security in one unit. Investors carry out this trade to try to profit from the spread or difference between the buying and selling prices.
Palihapitya based his view on Amazon’s decision to ban the use of Visa credit cards in the UK, due to high transaction fees, last month.
“The canary in the coal mine here is very important,” he said. “Amazon wouldn’t do such a thing, in my opinion, unless it was a test of what they could do around the world.”
“There is no need today for all these small businesses to sit on the bars of Visa, MasterCard, and AmEx. It is unnecessary.”
He also expected to be the first movers to adopt this emerging technology in the developing world.
“That’s why I think the focus in markets like Nigeria is for me more exciting than talking about the lackluster Western European countries. This is where these things are going to happen,” he said.
“We will look back in 10 years and the market caps (traditional payment processors) will be lower financially.”
Visa and Mastercard were underperforming in 2021, with their share prices roughly flat since the start of the year, compared to a roughly 27% increase in the S&P 500.
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