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Santander sees Bitcoin as a Risk to Card Issuers

Reading Time: 2 minutes by on September 10, 2016 Bitcoin, Business, Commentary, News
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The Spanish banking giant, Santander, recently published a report stating that it views Bitcoin as a potential risk to credit card issuers and acquirers.

In the report, which focuses on the Brazilian market, Santander’s equity research team highlights Bitcoin’s benefits over typical card payments, including substantially faster transaction time, no need for contracts, considerably lower transaction fees, and the free-of-charge use of the blockchain versus expensive back-office transaction systems.

Credit card operators such as Cielo, the largest in Brazil, would likely suffer if bitcoin adoption grows, as their business model could be challenged; their point-of-sale revenues and net merchant discount rate (the fee paid to both the issuer and acquirer bank) could both drop substantially if more merchants in Brazil decide to adopt bitcoin as a means of payment. This would also negatively affect issuer banks, which would see their interchange revenues endangered. Credit card suppliers could also be at risk if more people adopt mobile bitcoin wallets as their primary means of making payments, thereby decreasing the demand for physical credit and debit cards.

Judging by Brazil’s rising bitcoin adoption, as measured by trading volumes, the threat to card issuers and acquirers is certainly growing and looks increasingly more viable. According to London-based bitcoin market advisory firm BitStocks, in 2015,

“bitcoin trading grew by 322 percent and bitcoin wallet adoption by 461 percent” in Brazil, while “total merchant transactions from the region increased by 1,747 percent.”


The majority of Brazil’s bricks and mortar business that accept bitcoin are small businesses, such as the ‘Las Magrelas’ bike shop in the center of Sao Paulo or the hostel ‘Kyrios Pousada” located at Maresias Beach, outside Sao Paulo. However, it is not exclusively smalls local businesses that are adopting bitcoin. One of Brazil’s leading construction companies, Tecnisa, has also started to accept bitcoin as a means of payment. It is offering a 5 percent discount to customers who pay in bitcoin for purchases up to 100,000 BRL, which demonstrates that even larger businesses are acknowledging the benefits of accepting the digital currency as a payment option.

Conversely, the report states that large credit card brands, such as MasterCard and Visa, and banks could actually benefit greatly from the adoption of blockchain technology to lower transaction fees and back-office costs. Exchanges could also benefit from an increased bitcoin adoption, as foreign exchange and derivative trading revenues would increase if bitcoin were to be made available to trade and clear on exchanges.

You may think that credit and debit cards have become such an integral part of our financial lives that they will not be replaced by cryptocurrency or fiat currency-based mobile payments. However, for those of us old enough to remember chequebooks, will also remember that there was a time where cheques were regularly used to pay for goods and services at retailers.

But who still uses cheques now? Soon the same may be said for cards.

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