Why it Matters: Payment Processor Giant Mastercard to Support Crypto

In a recent announcement, Mastercard, a global leader in the payments technology industry, declared its plans to start supporting select cryptocurrencies directly on its network. 

For reasons obvious, crypto and payment industry experts are considering this announcement to be a game-changing event that has the potential to reshape the perception around digital assets in a radically new way. 

A concise deep-dive into the expanse of Mastercard as a global service provider shows us that the enthusiasm around its latest declaration stands on robust foundations. 

What’s So Great About Mastercard?

Mastercard is global in the truest sense of the word. It serves individual consumers, small and medium sized businesses, governments and public sector enterprises, large private enterprises and banks, and credit unions in more than 210 countries and territories. 

According to the latest available data for the financial year 2020, the combined number of purchase transactions conducted through Mastercard was 113,047 million or more than 113 billion worldwide. In the United States alone, the number, including Mastercard’s credit, charge, debit, and prepaid programs was more than 30 billion. 

Even during a pandemic-stricken economy, Mastercard managed to register a growth of 4.4% in their worldwide purchase transaction numbers. 

If we look at the purchase volume in terms of their combined US dollar value, we find astounding numbers that indicate the global dominance Mastercard commands in the global transactional economy. In FY 2020, Mastercard facilitated purchases worth more than 2.7 trillion dollars worldwide. 

To get a sense of how significantly large this size is, let’s have a look at the volumes of some of the world’s largest economies. India’s economy is the fifth-largest in the world, with a GDP of 2.94 trillion USD, followed by the United Kingdom’s 2.83 trillion USD and France’s 2.71 trillion USD.

This payment flow has brought benefits beyond consumers, to businesses as well. A number of small businesses payment and accounting software, such as Freshbooks, allow businesses to get paid fast and with low fees—including via Mastercard.

When such a large-scale global player decides to support crypto payments, we can reasonably presume that the growth and expansion of cryptocurrencies have led traditional financial institutions to look at digital currencies as an addition to the mainstream rather than a mere alternative. 

The question that arises now is this: how would the support of Mastercard help cryptocurrencies in the days to come? To better comprehend the benefits, we need to understand the nature of the exchange between these two segments in greater detail. 

Cryptocurrencies and Mastercard: The Nature of the Exchange

Since interaction between a globally-renowned payment facilitator and instruments of decentralized finance is a newly-developing, nascent formation, Mastercard has carefully weighed the pros and cons of the association. Their assessment reinforces the claims that crypto advocates have been citing for quite some time now. 

Mastercard admits in no uncertain terms that people are increasingly using cards to buy crypto assets. This tendency augmented further on the back of Bitcoin’s surge in value. Mastercard has also observed users increasingly leveraging crypto cards to access their assets and convert them to fiat currencies for spending. 

To speak in numbers, data obtained from global consumer surveys shows that consumer interest and investment in digital currencies had grown at such a significant pace in recent years that in many of the countries up to 20 percent of the population are holding them. Additionally, a notably increased number of merchants, digital players, and financial institutions are exploring the provision of payment through cryptos. 

Before deciding to include crypto payment services in their portfolio, Mastercard prepared a framework that would help them, in the future, to finalize which currencies to support. 

Consumer protection features are of utmost importance to Mastercard. They want the cryptocurrencies they support to have the same standards of privacy and security that their consumers are habituated to getting from their credit cards. 

They would also demand their cryptocurrencies to have stringent compliance protocols such as mandatory KYC declarations and strict adherence to local laws and regulations. Finally, they would want their crypto assets to offer the stability that a spending instrument essentially requires.

Since most of the cryptocurrencies would aim to leverage the huge network that Mastercard has to offer, they would make sincere efforts to keep up with these requirements. It would mean improvement in their blockchain protocols in terms of security and protection and sustained efforts to contain the volatility in crypto prices. 

The Road Ahead

Mastercard has already teamed up with Wirex and BitPay to create crypto cards that allow people to make transactions using their cryptocurrencies. It has also joined forces with LVL, a soon-to-arrive exchange for cryptocurrency. While Mastercard’s collaboration will allow many more merchants to accept crypto payments, the cryptocurrency platforms would get more opportunities to streamline their services and innovate. 

Mastercard has the crypto industry’s largest blockchain portfolio to offer. It has already been granted a total of 89 blockchain patents globally. An additional 285 blockchain patent applications are pending worldwide. Resultantly, crypto protocols get a large-sized innovation reservoir to draw from. 

The collaboration with Mastercard will also help to solve the longstanding issues associated with delayed payments. As cited earlier, Mastercard processes more than a hundred billion transactions each year. Practically, it reduces the transaction time to a matter of milliseconds. Thus, crypto payments would become more convenient for users. 

Mastercard is also engaging with several major central banks around the world. This collaboration will help the banks to create the most sophisticated currencies possible.

Overall, the relationship between crypto-assets and Mastercard would prove to be mutually beneficial. While Mastercard would get a readymade crypto-user audience to serve, the cryptocurrencies will gain more credibility. Mainstream users will trust them more. The use of cryptocurrencies as a medium of payment would become equipped to offer more ease and convenience to its users.

What do you think of Mastercard’s announcement to support crypto in 2021? Which cryptocurrencies do want to see supported? Let us know in the comments below.