Billionaire Chamath Palihapitiya says Visa / Mastercard biggest failures 2022

[Hydrogen]

Billionaire investor Chamath Palihapitya has boldly predicted that Visa and Mastercard, two of the biggest payment processors, will be overthrown by emerging blockchain and DeFi projects in 2022.
"My biggest business loser for 2022 is Visa and MasterCard and traditional payment rails and the entire ecosystem around it," he said in an episode of the "All-In Podcast" released Wednesday.
To him, the long-standing payment systems used all over the world are a "completely contrived duopoly that doesn't need to exist."

Palihapitya, a former Facebook executive who runs the venture capital fund Social Capital, shared what he thinks will be the "most profitable spread trade" of his lifetime in the coming year.

"Be short these companies and anybody that basically lives off of this 2 or 3% (transaction) tax, and be long well-thought-out, Web3 crypto projects that are rebuilding payments infrastructure in a completely decentralized way," he said.

Without being specific, he predicted at the same time that "a lot of these scammy crypto projects will go to zero."

"If you read the whitepapers of these crypto projects, and you systematically put together a framework, I think you can be long those and you can be short Visa/MasterCard, because I think this is their peak market cap," he added.

A spread trade is a market order in which a trader simultaneously carries out a purchase of one security and sale of a related security in a single unit. Investors execute this trade to attempt to profit from the spread, or difference, between the buying and selling prices.

Palihapitya based his opinion on Amazon's decision to ban the usage of Visa credit cards in the UK, because of high transaction fees, last month.

"The canary in the coal mine here is pretty significant," he said. "Amazon is not going to do something like that, in my opinion, unless it's a test of what they can do all around the world."

"There really is no need today for all these small businesses to sit on top of Visa, MasterCard, and AmEx rails. It's unnecessary."

He also predicted the first movers for the adoption of this emergent technology will be in the developing world.

"This is why I think focusing in markets like Nigeria to me are way more exciting than talking about these fading Western European countries. This is where this stuff will happen," he said.

"We'll look back in 10 years and (traditional payment processors) market caps will be materially lower."

Visa and Mastercard have been underperformers in 2021, with their stock prices roughly flat year-to-date, compared with a roughly 27% gain in the S&P 500.

https://markets.businessinsider.com/news/currencies/chamath-palihapitiya-visa-mastercard-biggest-losers-2022-web3-crypto-altcoin-2021-12

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This is interesting:

Palihapitya based his opinion on Amazon's decision to ban the usage of Visa credit cards in the UK, because of high transaction fees, last month

Also interesting:

"This is why I think focusing in markets like Nigeria to me are way more exciting than talking about these fading Western European countries. This is where this stuff will happen," he said.

I think the consensus is cryptocurrencies cannot hope to compete in home, car, business or student loan markets. Crypto lacks the support and infrastructure network necessary to do background or credit checks for those applying for loans in these areas. Visa and mastercard however have no such protections. Not only from crypto. But also from many 3rd party electronic payment apps which are whittling away at market share historically held by visa/mastercard/american express.

In recent history we have seen retailers like sears struggle against new innovations and methods of doing business fostered by walmart and later amazon. Is it safe to say that visa and mastercard will soon meet the same fate sears did, losing significant maket share and stock value versus newcomers to the market who enjoy basic fundamental advantages?

[pushups44]

It doesn't take interest in crypto to notice that the Visa and Mastercard duopoly is a big problem. With roughly 3 percent fees charged to merchants for simply using their payments system, and offering nothing else, it's only a matter of time before the market removes this type of gross inefficiency. Palihapitiya is right that it will probably be crypto that corrects this problem.

[DaveF]

If he was talking about 5 to 10 years I would think yes, with more and more businesses adding other payment methods like cashapp and venmo and zelle I can see that cutting into Visa / MC business more.
To get a lot more use of BTC in that environment we will need a lot more merchants accepting it directly.
With MC working to do it I can see that hurting Visa, but that's about it.

This is interesting:

Palihapitya based his opinion on Amazon's decision to ban the usage of Visa credit cards in the UK, because of high transaction fees, last month

Nah, MC / Visa are doing fine in terms of this. The Amazon thing is just 2 big kids on the block flexing their muscles.
Amazon thinks that since they are so large they can force other people to do what they want.
Visa more or less thinks the same.
Visa might also be pissed that just about everywhere else the Amazon co-branded card is a Visa but in the UK it's a Master Card.

-Dave

[hatshepsut93]

DeFi and blockchain projects have like literally zero percent share among the consumers, they are only used for speculative trading of tokens and shitcoins. It's completely nuts to think that they will overthrow Visa, even them taking 0.001% share of Visa's market is totally unrealistic.

Did this guy invest in some shitcoins and is now trying to pump them?

[nelson4lov]

DeFi and blockchain projects have like literally zero percent share among the consumers, they are only used for speculative trading of tokens and shitcoins. It's completely nuts to think that they will overthrow Visa, even them taking 0.001% share of Visa's market is totally unrealistic.

Did this guy invest in some shitcoins and is now trying to pump them?

This isn't the case as not all assets are only for speculative reasons. There's bitcoin and a ton of other projects that are pushing crypto limits every year and it's only a matter of time before businesses and merchants integrates crypto to their products and services and if their users are crypto-oriented, it shouldn't be too hard for people to migrate to paying with Bitcoin and altcoins as opposed to using Credit cards from traditional financial institutions.

I believe that it's only a matter of time now.

[stompix]

Yeah, Visa is doomed, especially reading their report, complete failure, 10% increase in revenue and 16% increase in payments, volume, one can't stop wondering why they aren't filing for bankruptcy.

Far more likely that by the end of 2022 payments via Visa and Mastercard cards that are issued by crypto exchanges might exceed the number of transactions on-chain (excluding LN).

From Oct. 1, 2020 to Sept. 30, 2021, the company processed $3.5 billion in digital currency transactions through its crypto-linked card schemes, according to Nikola Plecas, Visa’s European crypto lead.

People are underestimating both laziness and the need for a convenient easy way to pay that 99% of the population cares about, far more than the ones for which privacy or being in control of their own funds matter the most.

"This is why I think focusing in markets like Nigeria to me are way more exciting than talking about these fading Western European countries. This is where this stuff will happen," he said.

Yeah, lol...
Lots of spending power in Nigeria, almost half that of the Netherlands!
Wonder why he isn't focusing on Burundi, that's for true the next global power.

[DooMAD]

Yeah, Visa is doomed, especially reading their report, complete failure, 10% increase in revenue and 16% increase in payments, volume, one can't stop wondering why they aren't filing for bankruptcy.

Yeah, pretty sure it's way too soon to write off Visa and Mastercard.  Although, to be fair to the millionaire, he did use the phrase "peak market cap".  The article appears to be taking his words out of context a little.  If the gist of his argument is that Visa/Mastercard aren't going to get much bigger, while crypto is going to get bigger, then that's a distinct possibility.

[Kakmakr]

The Defi platforms and other Alt coins will mostly turn scam.... and on that I will agree. VISA and MasterCard is just too big and they will hire their own developers to develop something that will prevent a disruption of their business. (Governments will also use legislation to protect these large companies that are backed by Banks) 

I will much rather focus on the new innovative platforms that are targeting the remittance market .. because one or two of those project might just be the one that goes through the roof.  (Bitcoin can do all that, but most governments are scared of the Bitcoin reputation)

[dothebeats]

The Defi platforms and other Alt coins will mostly turn scam.... and on that I will agree. VISA and MasterCard is just too big and they will hire their own developers to develop something that will prevent a disruption of their business. (Governments will also use legislation to protect these large companies that are backed by Banks) 

While the ideas laid bare by altcoins on defi is really ground breaking and innovative, most of these projects lose traction in just a few months after they already get enough money from peers and the general public. It's true that most of these innovative altcoins will likely turn out as scams, though the innovation that they bring on the table can still be reused with the right set of minds that pick them up.

I wouldn't bank heavily on Defi and crypto payments overthrowing Visa and Mastercard. This will take a lot of time before people can be comfortable in making the switch.

[Fortify]

This is interesting:

Palihapitya based his opinion on Amazon's decision to ban the usage of Visa credit cards in the UK, because of high transaction fees, last month

Also interesting:

"This is why I think focusing in markets like Nigeria to me are way more exciting than talking about these fading Western European countries. This is where this stuff will happen," he said.

I think the consensus is cryptocurrencies cannot hope to compete in home, car, business or student loan markets. Crypto lacks the support and infrastructure network necessary to do background or credit checks for those applying for loans in these areas. Visa and mastercard however have no such protections. Not only from crypto. But also from many 3rd party electronic payment apps which are whittling away at market share historically held by visa/mastercard/american express.

In recent history we have seen retailers like sears struggle against new innovations and methods of doing business fostered by walmart and later amazon. Is it safe to say that visa and mastercard will soon meet the same fate sears did, losing significant maket share and stock value versus newcomers to the market who enjoy basic fundamental advantages?

The sad thing is these supposedly prophetic billionaires are usually just trying to line their own pockets when coming out with so-called predictions like these. You can almost guarantee that this guy has put a sizable chunk of money into a bunch of different cryptocurrencies and is hoping to see them skyrocket with such announcements. Visa and Mastercard have a pretty comfy setup, while American Express seems to be growing a nice share of the market too, as they are what 99% of the richest nations on the planet use for the majority of day to day transactions. The average person, unlike what some here would like to believe, simply has no need to build more inconvenience into their current payment method and that is a large barrier to crypto growing in future. Crypto would better succeed much more alongside such existing payment processors than seeing them as a threat.

[DapanasFruit]

We are hoping that there can be a time when Visa and Mastercard can be facing less business as more and more people are opting alternatives offered by crypto and blockchain based platforms. However, since we are still in the inception stage, this is not yet coming true not even in the few years from now so the duopoly remains to be the strong players. In DeFi, there are still many big challenges most especially in security that we need to improve a lot before people can be fully trusting platforms on this side but I know that this is really coming - this is therefore a matter of WHEN and not anymore IF.

[arwin100]

He's somehow right since now he see that some countries are now looking at adopting bitcoin and this will be huge if 3rd world countries will do it since those online payment processors will be out of business if bitcoin will wide spread more which is currently happening right now. Also the total capitalization of bitcoin is getting more bigger so this is expected and if those said business will not do anything with it then they will sink since bitcoin will dominate them.

[davis196]

VISA/Mastercard are "too big to fail" at this point.
If a competitor has a competitive edge against VISA/Mastercard,they could simply buy that competitor.
If the crypto industry has a competitive edge against traditional fiat credit/debit card payments,then VISA/Mastercard will just adopt crypto/blockchain payments(if the authorities allow them to do so).
"If you can't beat them,just join them. "

Facebook bought Instagram and Whatsapp,because they were competing against Facebook,right?

I agree that DeFi projects and the cryptocurrency payment infrastructure aren't really matured but they have a lot of potential.However,the vast majority of the people will stick to what they are familiar with-credit and debit cards.The crypto industry must become way more convenient and user-friendly,in order to get the attention of the "average Joe".

[mk4]

It doesn't take interest in crypto to notice that the Visa and Mastercard duopoly is a big problem. With roughly 3 percent fees charged to merchants for simply using their payments system, and offering nothing else, it's only a matter of time before the market removes this type of gross inefficiency. Palihapitiya is right that it will probably be crypto that corrects this problem.

If it ends up being the case, definitely not any time soon. Assuming we're talking about stablecoins here, Ethereum can't take the load hence the high transaction fees. Even bitcoin itself can't yet, as we still barely have adoption with Lightning. The only way I can see this happening in the near future is through centralized platforms such as Coinbase.

[stompix]

Yeah, pretty sure it's way too soon to write off Visa and Mastercard.  Although, to be fair to the millionaire, he did use the phrase "peak market cap".

He also did a weird twist there:

"I think you can be long those and you can be short Visa/MasterCard, because I think this is their peak market cap," he added.

And his comparison actually goes on the revenue from trading shitcoins rather than Visa stocks

Palihapitya, a former Facebook executive who runs the venture capital fund Social Capital, shared what he thinks will be the "most profitable spread trade" of his lifetime in the coming year.

Visa shares are just 7$ up on the year to year, roughly 3% while their revenue is up 3 times that, judging a company from its share prices to me seems like quite the stretch. Walmart is actually down on the same period, does it mean it will become a failure?
It's not about the business, it's about making money from trading and he thinks that the hype around defi would outperform traditional stocks, which can definitely be true, but he didn't dare to say that some shitcoin will overcome Visa in volumes of actual payments.

I have a feeling that shorting shitcoins in 2022 will be far more profitable than betting on all Apple, Tesla Gold, Bitcoin, or anything else.

 

[Lucius]

DeFi and blockchain projects have like literally zero percent share among the consumers, they are only used for speculative trading of tokens and shitcoins. It's completely nuts to think that they will overthrow Visa, even them taking 0.001% share of Visa's market is totally unrealistic.

Did this guy invest in some shitcoins and is now trying to pump them?

I would not be surprised if this is the case, because it seems illogical to me that someone can just say that powerful players in the market can lose their market shares in such a short time. Regardless of new technologies, Visa and similar companies have the trust of customers that have been created over a long period of time, and at any time they can react with reduced fees and become even more competitive in the market.

At first I didn’t even realize who it was until I merged the name with the picture, and I remember that Chamath Palihapitiya often pointed out how important it is to invest in Bitcoin, and he is one of the early investors so there is no doubt that he is one of those who realized very early on what it was all about. Back in 2017, he stated that BTC would reach a price of $1 million in 20 years, which is much more reasonable than those who sold us those stories in a much shorter period.

[kryptqnick]

I think that his prediction doesn't qualify as objective (in a sense of disinterested) because he's been bullish about Bitcoin for many years and has held BTC since 2013. He believes in Bitcoin and is interested in it winning over Visa and Mastercard. But at least he's being realistic that it's not going to happen in Western countries in the near future. The developing world has more incentive to experiment in case it improves economic well-being, after all. But Nigeria, specifically, doesn't strike me as a place for such a big change. After all, its government clearly isn't very pro-crypto.

[NeuroticFish]

Billionaire investor Chamath Palihapitya has boldly predicted that Visa and Mastercard, two of the biggest payment processors, will be overthrown by emerging blockchain and DeFi projects in 2022.

1. 2022 is far too early for such prediction.
2. The Amazon UK thing is irrelevant.
3. Don't forget that Visa is doing big steps towards crypto so they will evolve and stay in business.
4. That billionaire was once super bullish on Tesla, then sold. So his declarations, already biased, may turn completely at some point, depending on the markets. I.e. this is not reliable and news worthy.

[fiulpro]

It doesn't take interest in crypto to notice that the Visa and Mastercard duopoly is a big problem. With roughly 3 percent fees charged to merchants for simply using their payments system, and offering nothing else, it's only a matter of time before the market removes this type of gross inefficiency. Palihapitiya is right that it will probably be crypto that corrects this problem.

But we cannot expect cryptocurrencies to correct this probelm because I think we still have to work on the lightning network for the time being, using cryptocurrencies as the method of payment would have many probelms for example:
1. Not widespread acceptance
2. Need more effective solutions in lightning network
3. Major companies are still using Visa/Mastercard
4. What if Visa/ Mastercard does improve their rates ?? It's better to have a solution rather than just shrug it off.
5. Visa/Mastercard is kind of important in buying/selling crypto and other payments, they are most widely used in most countries, you cannot just ban them outright.