Billionaire Chamat Palihapitiya believes the two payment systems will be the biggest business failures in 2022. Other analysts are more optimistic.

Investors' opinions are traditionally divided: while some predict the collapse of cryptocurrencies and everything connected with them, others are set up precisely for the failure of traditional payment systems, which will soon be unable to withstand the blockchain. The second is the billionaire investor, former Facebook executive and manager of the venture capital fund Social Capital, Chamat Palihapitiya. Korrespondent.net gives details.

Will not compete

Palihapitiya predicts that Visa and Mastercard, the two largest payment systems, in 2022 will lose the competition to financial instruments such as blockchain projects and DeFi (decentralized finance & # 8212; financial instruments in the form of services and applications built on the blockchain).

& # 171; The biggest business losers in 2022 will be Visa and Mastercard, as well as traditional payment systems and the entire ecosystem around them & # 187; & # 8212; stated Palihapitiya on the All-In podcast.

He called the two payment giants “a completely contrived duopoly that doesn't need to exist” and expressed his belief that their shares would be his “most profitable spread” in life.

Spread & # 8212; This is an exchange transaction in which a trader simultaneously buys a security and sells it in order to profit from the difference between the buy and sell prices.

The billionaire advises to play short with the shares of these companies and, conversely, open long positions for well-crafted Web3 crypto projects that he believes will restore a decentralized payment infrastructure.

& # 171; If you read the official documents of these crypto projects and systematically analyze the situation, I think it makes sense to open a long position on them, and on Visa and Mastercard & # 8212; short. Because I believe this is their peak market cap & # 187 ;, & # 8212; added by investor.

Web 3.0 & # 8212; it is a new concept of the Internet based on decentralization, lack of a single body of control and censorship. This is its main difference from the current version & # 8212; Web 2.0. The era of the & # 171; new Internet & # 187; has not yet come and, as experts believe, it may take several years before it comes.

However, Palihapitiya added that & # 171; many of the fraudulent crypto projects will come to naught & # 187 ;. He did not give details, only agreeing with the opinion of his interlocutors that there are too many cryptocurrencies and some of them should disappear.

He formed his opinion, including based on Amazon's decision to ban the use of Visa credit cards in the UK.

In November, online retailer Amazon announced that it would no longer accept UK-issued Visa credit cards from January 19, 2022 due to high transaction processing fees. However, the company's customers will still be able to use Visa debit cards, Mastercard and American Express credit cards, and Visa credit cards issued outside the UK.

He called the Amazon situation & # 171; the canary in the mine & # 187; & # 8212; an idiomatic expression for something that signals danger.

& # 171; In my opinion, Amazon would not resort to something like this, unless it is not a test of what they can do around the world , & # 8212; the billionaire explained his point of view. & # 8212; Today, there really is no need for all these small businesses to sit on the rails of Visa, Mastercard and Amex & # 187 ;.

Palihapitiya also predicted that developing countries would be pioneers in the introduction of new technology. “This is why focusing on markets like Nigeria is so much more appealing to me than talking about vanishing Western European countries. This is where it happens & # 187 ;, & # 8212; he believes.

& # 171; In ten years, we will look back and the market capitalization of traditional payment systems will be significantly lower & # 187 ;, & # 8212; convinced the investor.

Trying to keep up

Meanwhile, both Visa and Mastercard are trying to keep pace with the times and are also actively developing their cryptocurrency directions.

Thus, Visa became the first of the major payment systems to start conducting transactions in cryptocurrency. For this, the company partners with Crypto.com & # 8212; one of the largest crypto platforms. Last March, Visa completed a USDC stablecoin transaction using the Ethereum blockchain. Previously, the payment system allowed its users to make transactions only in fiat currency.

And in December, Visa began providing consulting services on working with cryptocurrencies and non-fungible tokens (NFT) for its clients. The company said that helping with cryptocurrencies will help drive the massive adoption of Bitcoin and other digital assets.

In July, Visa reported that in the first half of 2021, consumers from around the world spent over a billion dollars worth of cryptocurrencies through linked cards. And according to the cryptocurrency branch of Visa in Europe, in the period from October 1, 2020 to September 30, 2021, the company processed cryptocurrency transactions worth over $ 3.5 billion.

Mastercard at the end of October also announced the integration of cryptocurrency payments … Payment partners, including stores and banks, are expected to be able to add support for digital assets to their products soon. To this end, Mastercard has partnered with the Bakkt cryptocurrency platform through which customers can buy, sell and store digital assets.

In addition, Mastercard plans to add support for cryptocurrencies to its loyalty program so that payment network partners can offer bonuses in the form of digital assets to their customers.

What's on the market

Visa and Mastercard are below the market in 2021: their stock prices remained virtually unchanged, while the S & amp; P 500 rose 27%.

The second half of November was especially difficult for payment systems, when their shares fell by 10% or more. Besides the general factors & # 8212; such as the spread of the Omicron strain and the rise in inflation, the price of securities was affected by Amazon's decision on Visa. And although Mastercard had nothing to do with this, its shares also collapsed.

But in December, the companies performed better: thanks to the growth of expenses during the holiday season, their securities grew significantly faster than the market, allowing in the end to complete the year at least and not much, but in positive territory.

For 2022, analysts are optimistic about both companies, because their value is directly related to the state of the US economy, which is expected to grow by 3.5%.

According to the TipRanks portal, the vast majority of analysts recommend buying both Visa and Mastercard securities. The first is predicted an average target price of $ 273 (compared to $ 222 for today), the second is & # 8212; $ 436 (up from $ 375).

However, both companies will face serious competition from more advanced projects that may sooner or later squeeze the payment giants.