Don’t Think Crypto Will Change How We Send And Spend Money? Visa Does.

And its latest marketing campaign proves it.




Considering how integral money is to our lives, it’s amazing how much confusion and misunderstanding surrounds it. Take Visa, for example. Did you know that Visa doesn’t issue any credit cards?


Not one. The Visa cards in your wallet are issued by banks, lenders, and other retail partners i.e. Target or Costco...but none by Visa. Crazy right? So, if Visa isn’t a “credit card company” what is it that they do, exactly?

Depending on who you ask, answers may vary from “they provide financial services” to “they steal from hardworking people and small businesses each time either wants to move their own money.” With an opinion gap that wide, it’s best not to speculate. Let’s go directly to the source. Here’s what Visa does according to the script in their “Meet Visa” ad (linked above): “Visa is a network. It helps people move money from here to there. Visa works to open doors all over the world so more of us can play a part in this commerce thing. Meet Visa, a network working for everyone.” At first glance and without a working knowledge of the broader payments space (how it works, who the players are, etc.) the ad copy probably seems pretty straightforward. But there’s actually a ton to unpack here…and, in our opinion, it’s all about being strategically positioned to remain relevant in the crypto-powered world of decentralized payments. Since "confusion" is a primary theme of this post, let’s get unconventional and start at the end of the script: “Meet Visa, a network working for everyone.” Meet Visa? What? Why? Visa shouldn’t need an introduction. They’ve been around since 1958 and the 104 million Americans that have a Visa Card can use it at 44 million merchant locations in over 200 countries and territories. So what gives?


Why after 60+ years is Visa deciding that the most strategic move it can make is to educate people about what it does and how it works?

Simple: Because they don’t want to become the Blockbuster Video of global payments. Confused? We gotchu. It boils down to this: the same way most people have misconceptions about what Visa is and does, they have similar misconceptions about what crypto is and does. Let’s go back to the video script: “Visa is a network. It helps move money from here to there.” The exact same can be said for Bitcoin, Ethereum, Cardano, and a ton of other cryptocurrencies. And here’s where the primary point of confusion comes in: Most people think that crypto is just “digital money.” But here's the thing - that’s a bit like saying “math is just a bunch of numbers.” Is it true? Sure. Is it grossly oversimplified and misleading?


Ya. Let’s start at the top - and, for the sake of keeping the scope of this post as narrow as possible, we’ll only discuss crypto through the general lens of payment processing. [Note: if you’re interested in digging deeper into anything mentioned here or the other purposes of crypto, like powering the next iteration of the internet or want to know what the hell even is a blockchain, head on over to CreamCityCrypto.com's homepage and click around a bit!] *** Now back to our regularly scheduled programming *** Yes, crypto has value and therefore, like money, it can be exchanged for goods and services. But here’s what most people don’t get yet: the power of crypto isn’t that it’s digital, it’s that the networks they power to move money and process transactions are decentralized. Let's examine what that actually means. Digital money isn’t new.


Like we covered earlier, Visa has been around since 1958 and you use digital money every time you use a credit card, a p2p service like Venmo, or get paid with direct deposit.

In all of those instances, there’s no paper money involved - just computer code keeping track of how much money is moving in and out of your account. A digital ledger of your spending. Again, here’s an instance where cryptocurrency-powered blockchain networks do the exact same thing…keep track of money moving in and out of accounts.

(Free tip - in crypto - the correct word to end that last sentence would be "wallets" and not "accounts" but we want to protect you all from any lexicon-related confusion :)

***

But with one glaring caveat: Visa, a single entity, owns and controls the payment network that its cards use to process payments. So, they have the power to charge fees to use the network and increase those fees for international use, for example. With crypto, the network is decentralized, meaning no single company, government, or person owns or controls the network. Translation: crypto lets people send and receive money anywhere in the world for (basically) free. And why is that a big deal? A lot of reasons. Let’s stick with Visa for a second. Since it owns and controls a global payment network, it makes the rules. Translation: they charge people and businesses to move their own money from one place to another…and made $3.3 billion doing so in Q2 of 2021. Let me say that again: Visa made $3.3 billion in three months by charging people and businesses to process payments on its network.


You may not be aware of this, but each time you use a credit card to make a purchase, credit card companies hit the seller that you’re buying from with a fee. Of course, no person or business wants to lose money, but for now, retailers deal with it because they don’t have a viable alternative.

But things are changing. In November of last year, Amazon stopped accepting Visa payments in the UK, citing “high charges.” Wanna know what else Amazon did in November of last year? Started a candidate search to hire an in-house “Head of Digital and Blockchain.” ***If you wanna go find a tinfoil hat to strap on for the rest of this post, now’s the time.*** Ha, and if you don’t have one, no worries - this is less of a conspiracy theory than it is just logic and common sense. Because Visa's network is centralized (owned and controlled by one entity) they have the ability to increase fees if they want…and that’s exactly what they did. And, sadly, these rate hikes aren't outliers, they're business as usual.

According to Britain’s Payment Systems Regulator, an independent agency, some of the fees paid to both Mastercard and Visa approximately doubled between 2014 and 2018. Money talks: As it relates to the increased fees, the British Retail Consortium said that retailers in Britain and the European Economic Area faced paying an extra 150 million pounds ($202 million) a year to accept cross-border card payments. Now, given the choice, do you think those companies would rather pay the extra $202 million per year on top of the standard fees Visa charges...or not have to pay any fees at all? And, now, we're starting to reveal what’s at stake when it comes to cryptocurrency.


As adoption and usage continues to increase across the globe, it threatens to render billion-dollar legacy finance companies, like Visa, obsolete. Because without the need to use its payment network to shop and pay each other, Visa would lose out on that $3.3 billion of quarterly revenue we alluded to earlier. As people continue to learn more about what crypto - what it actually is and what it actually does - increased usage and adoption is inevitable.


Because, again, why the hell would anyone agree to be charged to spend and send their own money if they don’t have to? And, in a nutshell, that’s really what crypto, blockchain, and decentralization are all about: creating a more equitable world through democratization…shifting the power dynamic by eliminating the need for third-parties that control the flow of money and information. So, if you’re Visa, what’s the best strategic move? Simple: educate people on what you do so that when they inevitably learn about the biggest threat to your bottom line (in this case, crypto) you’re prepared to make a counter-case that they’ll actually understand. Because, while crypto’s value proposition of sending money to anyone, anywhere for free, is easy to understand and hard to argue with, Visa, and other established, centralized payment processors, still have obvious advantages over emerging crypto-based alternatives. For example, processing speed. On average, Visa, for example, handles around 1,500-2000 transactions each second while Bitcoin averages about five.


(Explaining this further would be slightly more technical, and since this post is already longer than War and Peace, we don't have time for that ish right now - will cover in a different post!)

In layperson’s terms: people don’t want to sit around and wait for their payments to settle, they either want to get paid now and/or want their payment to be instant so they can go enjoy whatever it is they bought as soon as possible.

Visa currently has a huge advantage here. They also have the benefit of operating in traditional finance, which is heavily regulated and having 60+ years of brand loyalty/recognition. In contrast, since no single entity controls crypto, it’s largely unregulated and is relatively new technology, something that, in general, most people find to be scary. So, by educating people on the basics of payment networks, Visa can gain consumer trust while pointing out all of the things mentioned above - to make its case and convince folks that the benefits of using Visa's network may not be free, but they outweigh the financial benefit of using decentralized, crypto-powered networks instead.

In closing, here’s my hot take: Anyone still reading this novel-length post at this point is a national treasure and deserves to be celebrated.

Oh, and also, this:


Visa is competing in a fight that it can't possibly win. Not in its current iteration, anyway.


Crypto and Visa provide people with the same financial service of sending and spending money…but crypto does it for much cheaper - virtually for free.


And, since crypto is essentially open-sourced computer code, every legitimate crypto project will continue to improve in terms of efficiency.


Translation: As the tech evolves and the computing power of each network grows, crypto-powered blockchain networks will eventually be able to move money and process transactions faster than Visa.


In time, any benefit a consumer would get from using Visa's network instead of a decentralized, crypto-powered one will cease to exist.


Finally, let’s take one final trip back to that “Meet Visa” video script with our new knowledgebase:


“Visa works to open doors all over the world so more of us can play a part in this commerce thing. Meet Visa, a network working for everyone.”


As we’ve examined - Visa doesn’t work for everyone - they work for Visa…And those doors they open? They cost $3.3 billion per quarter to walk through.


So, while we understand Visa's marketing strategy and how consumers benefit from a new "introduction" to the company, we just don't see how that's better for everyone than choosing to "say hello" to innovation instead.