Billionaire Shamat Palihapitiya believes that the two payment systems will be the biggest business failures of 2022. Other analysts are more optimistic.
Investors’ opinions are traditionally divided: while some predict the collapse of cryptocurrencies and everything connected with them, others are prepared precisely for the failure of traditional payment systems, which will soon not be able to withstand the blockchain. The second is billionaire investor and former CEO of Facebook and director of venture capital fund Social Capital, Chamat Palihapitiya. Korrespondent.net Gives details.
Palihapitiya expects Visa and Mastercard, the two largest payment systems, to lose out in 2022 in the competition for financial instruments such as blockchain projects and DeFi (decentralized finance – financial instruments in the form of blockchain-based services and applications).
& # 171; Visa and MasterCard will be the biggest losers from business in 2022, as well as traditional payment systems and the entire ecosystem around them &# 187; & # 8212; Palihapitiya stated on the All-In podcast.
He called the two payment giants a “completely contrived and needless duopoly” and believed their stakes would be “the most profitable spread” in life.
spread & # 8212; It is an exchange transaction in which a trader buys a security and sells it at the same time in order to profit from the difference between the buying and selling prices.
The billionaire advises playing short with the shares of these companies and, conversely, opening long positions on well-designed Web3 crypto projects that he believes will restore a decentralized payment infrastructure.
& # 171; If you read the official documents of these crypto projects and systematically analyze the situation, I think it makes sense to open a long position on them, and on Visa and Mastercard & # 8212; short. Because I think this is the peak of its market value » , & # 8212; Investor added.
Web 3.0 & # 8212; It is a new concept of the Internet based on decentralization and the absence of a single body for supervision and oversight. This is the main difference between the current version & # 8212; Web 2.0. era & # 171; The New Internet & # 187; It is yet to come, and experts believe, it may be several years before it does.
However, Palihapitiya added that &# 171; Many fraudulent crypto projects will fail. He did not give details, but only agreed with the opinion of his interlocutors that there are too many cryptocurrencies and that some of them should disappear.
He has made up his mind, including based on Amazon’s decision to ban the use of Visa credit cards in the UK.
In November, online retailer Amazon announced that it would no longer accept UK-issued Visa credit cards from January 19, 2022 due to higher transaction processing fees. However, Company customers will still be able to use Visa debit cards, Mastercard credit cards, American Express and Visa credit cards issued outside the UK.
describing the state of the Amazon & # 171; The canary in the mine & # 187; & # 8212; An idiom for something that indicates danger.
& # 171; In my opinion, Amazon wouldn’t resort to something like that, unless it wasn’t a test of what they could do around the world, & # 8212; The billionaire explained his point. & # 8212; Today, there is really no need for all of these small businesses to sit on the bars of Visa, Mastercard, and Amex»
Palihapitiya also predicted that developing countries would be pioneers in introducing new technology. This is why it is more attractive to me to focus on markets like Nigeria than to talk about the disappearance of Western European countries. This is where &# 187; , & # 8212; he thinks.
& # 171; In ten years, we will look back and the market value of traditional payment systems will be much lower.” , & # 8212; Convince the investor.
trying to keep up
Meanwhile, Visa and Mastercard are trying to keep up with the times and are also actively developing their own cryptocurrency trends.
Thus, Visa became the first major payment system to start making transactions in cryptocurrency. For this, the company cooperates with Crypto.com & # 8212; One of the largest crypto platforms. Last March, Visa completed a stable USDC transaction using the Ethereum blockchain. Previously, the payment system only allowed its users to make transactions in fiat currency.
And in December, Visa began providing advisory services on handling cryptocurrency and non-fungible tokens (NFT) to its customers. The company said that assistance with cryptocurrencies will help drive massive adoption of Bitcoin and other digital assets.
In July, Visa reported that in the first half of 2021, consumers around the world spent more than $1 billion in cryptocurrency through linked cards. According to the crypto branch of Visa in Europe, from October 1, 2020 to September 30, 2021, the company processed more than $3.5 billion in cryptocurrency transactions.
Mastercard also announced at the end of October the integration of cryptocurrency payments… Payment partners, including stores and banks, are expected to be able to add support for digital assets to their products soon. To this end, Mastercard has partnered with Bakkt, a cryptocurrency platform where customers can buy, sell and store digital assets.
In addition, Mastercard plans to add support for cryptocurrencies to its loyalty program so that payment network partners can offer rewards in the form of digital assets to their customers.
What’s in the market
Visa and Mastercard were below the market in 2021: their share prices remained virtually unchanged, while S&M’s; The P500 rose 27%.
The second half of November was particularly difficult for payment systems, with their shares dropping 10% or more. besides general factors & # 8212; Like the spread of the Omicron dynasty and rising inflation, the price of the stock was affected by Amazon’s decision on Visa. And while MasterCard had nothing to do with this, its stock collapsed, too.
But in December, companies did better: thanks to the growth of expenses during the holiday season, their securities grew faster than the market, which finally allowed to complete the year at least and not so much, but in positive territory.
For 2022, analysts are optimistic about the two companies, because their value is directly related to the state of the US economy, which is expected to grow by 3.5%.
According to the TipRanks portal, the vast majority of analysts recommend buying Visa and MasterCard securities. The first expects an average price target of $273 (compared to $222 for today), and the second is – # 8212; $436 (up from $375).
However, both companies will face serious competition from more advanced projects that, sooner or later, may put pressure on the payment giants.