Stablecoin fever is running hot, but threat to Visa, Mastercard remains on ice

Investing.com -- Stablecoin fever is sweeping the payments world, with Amazon and Walmart (NYSE:WMT) reportedly exploring their own tokens and Shopify rolling out USDC/USD payments in over 30 countries. Bulls are calling this the next existential threat to Visa (NYSE:V) and Mastercard (NYSE:MA). Jefferies isn’t buying it. The firm says there’s still no killer use case for consumers—and the hype is running far ahead of reality.

“We don’t view stablecoins as a threat to Visa and Mastercard—there is still no compelling reason for consumers to use,” Jefferies analysts wrote, pushing back on the idea that a crypto-powered payments revolution is imminent.

The latest wave of headlines started with Shopify (NASDAQ:SHOP) enabling merchants to accept USDC, and reports that Amazon (NASDAQ:AMZN) and Walmart are looking at issuing their own stablecoins or even forming a merchant consortium to launch a shared token. The aim: cut card network fees and gain more control over payments. In theory, stablecoins could slash costs, speed up settlement, and even fund rewards for shoppers if backed by interest-bearing reserves.

The analysts, however, believe that the real challenge is getting consumers to care. “The value prop to the merchant is clear (lower acceptance costs by avoiding interchange) but we struggle to see what actually drives consumer adoption,” they said. “The stickiness of consumer behavior in payments is consistently underrated when discussing risk from alt. schemes/payment methods.” Even with discounts or cashback, Jefferies doubts the incentives would be big enough to shift behavior at scale.

If Amazon and Walmart do launch their own coins, Jefferies expects the model to look more like a closed-loop wallet—think Target’s REDcard, but digital—with stablecoins used inside each retailer’s ecosystem.

“We remain skeptical that U.S. consumers will adopt merchant-issued stablecoins at scale,” Jefferies said, noting that for stablecoins to displace cards, they’d need to offer either much deeper discounts (which would eat up all the cost savings) or radically better utility.

While stablecoins have hailed as the panacea for cross-border, the analysts suggest that in major currency corridors, stablecoins don’t offer a speed or cost advantage over existing FX rails, and fiat conversion is still required at both ends of the transaction.

“Stablecoins only represent the rail for movement of cross-border liquidity; fiat currency is still required to complete a payment into the intended recipient’s local bank account,” the analysts wrote. In harder-to-reach markets, stablecoins could improve margins by replacing SWIFT, but the impact is likely to be limited.

Stablecoins might be the latest buzzword in payments, but Jefferies sees little risk to Visa and Mastercard’s dominance—at least until someone cracks the code on consumer adoption. For now, the existential threat looks more like a headline than a reality.