The payments world is caught up in stablecoin mania! Incredibly, major corporations such as Amazon and Walmart are exploring creating their own tokens. While optimists call this a new existential threat to Visa and Mastercard, Jefferies analysts disagree. They see no viable mass-market use case to date, warning that market enthusiasm exceeds real-world adoption.

"We don’t view stablecoins as a threat to Visa and Mastercard," Jefferies analysts emphasize, dismissing notions of an inevitable cryptocurrency payments revolution. These conclusions follow recent talks about Amazon and Walmart potentially issuing stablecoins or even forming a merchant consortium for a shared token. This initiative aims to reduce card network fees and increase payment control. While stablecoins could theoretically lower costs, speed up settlements, and offer buyer rewards, Jefferies sees such projects as unlikely to materialize.

Jefferies analysts highlight that the core challenge lies in consumer adoption. "The value prop to the merchant is clear (lower acceptance costs by avoiding interchange) but we struggle to see what actually drives consumer adoption. The stickiness of consumer behavior in payments is consistently underrated when discussing risk from alt. schemes/payment methods," Jefferies noted.

If Amazon and Walmart launch their own coins, such a model would likely resemble a closed-loop wallet like Target's REDcard, but in digital form. However, Jefferies remains skeptical about US consumers widely adopting merchant-issued stablecoins. "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," the bank said.

While stablecoins have been touted as a panacea for cross-border payments, analysts argue that they offer no speed or cost advantages over existing currency exchange channels for major currency systems. All transactions still require fiat currency conversion.

"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," Jefferies emphasized.

Stablecoins remain one of the most popular payment methods, but Jefferies sees little risk to Visa and Mastercard's dominance. This issue ultimately comes down to consumer adoption, which  is exceptionally challenging to achieve, the firm assumes.