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Visa to open Visa Direct to stablecoins
Payment companies have been rushing to find the first use cases for stablecoins following the passage of the GENIUS Act, and cross-border payments has become a favorite among first movers.
Visa is opening its cross-border real-time payments network, Visa Direct, to a stablecoin prefunding pilot that will allow companies to move money to accounts in different countries instantaneously, even when banks are closed.
"What we're doing here is showing the world how stablecoins and the technology can help modernize our existing infrastructure and our existing payment methods," Mark Nelson, head of product at Visa Commercial and Money Movement Solutions, told American Banker. "We didn't do anything different with our payment network, it's still acting as it normally would."
At its core, Visa is positioning Visa Direct as the Switzerland for processing third-party tokens using its existing rules, policies, and network procedures.
"Visa is not issuing its own stablecoin, nor any co-branded stablecoin," said Richard Crone, CEO of Crone Consulting. "The release confirms support for third-party tokens only… but casts the model widely to include any approved issuer, including PayPal's PYUSD and others that can pre-fund Visa Direct."
Visa Direct processed 10 billion transactions in 2024 and reaches 11 billion endpoints, including 3.5 billion bank accounts, 4 billion cards, and 3.5 billion wallets, according to Visa.
How the prefunding pilot works
Visa's stablecoin prefunding pilot allows companies to send money to accounts in different countries using stablecoins, rather than having to park cash in a bank account overseas.
For example, if a rideshare company needs to pay drivers in another country over the weekend, it previously would have had to put three days' worth of collateral in a bank to handle those daily payouts in local currency.
That poses a problem for companies, Nelsen noted. "If, for whatever reason, it's a busy weekend and you start running out of money… and it's a Saturday afternoon and you need to top up this account, there's no easy way to do that, because the banks are closed. If you want to move money to a bank account, you need to wait until Monday."
Visa's stablecoin pilot is intended to smooth out that process by making funds available immediately. "If the client wanted to top off their account, they could simply send us stablecoins, and we would immediately recognize that stablecoin and update their account balance," Nelsen added.
Companies are able to convert funds into stablecoins over the weekend because stablecoin exchanges are open around the clock, with the funds being paid out in local fiat. Visa intends to support any stablecoin that is valid and "has meaningful volume," Nelson said.
Use cases abound
The first focus for the pilot will be on large remitters, but Visa sees a number of other use cases where stablecoins can be deployed.
"We can use stablecoins for settlement. Or stablecoins can also be used by consumers whereby, let's say you have a stablecoin wallet, you can have a Visa debit card attached to it and you can use that debit card at any merchant in the world that accepts a Visa card," Nelson explained. "You're starting to see all these little use cases that stablecoins could be applied just to make what we do today a little bit better."
Business-to-business accounts payable is another strong use case for stablecoin payouts. "Visa Direct is well-suited for reach and speed, but not for approval workflows or invoice reconciliation — the real greenfield for chargeable services," Crone said. Such use cases typically require integration of enterprise resource planning, electronic invoice presentment and payment, accounts payable, and accounts receivable systems.
B2B accounts payable is the single largest opportunity in payments with a global total addressable market of $120 trillion to $140 trillion, including $32 trillion to $40 trillion worth of cross-border transactions.
Still, regulatory clarity remains a challenge to simply rolling out stablecoin payouts to each of Visa Direct's 11 billion endpoints, according to Nelson.
"There's a handful of countries now that have something similar [to the GENIUS Act]. Over the next couple years, as you get more commonality globally around what the licensing requirements are going to be, you'll see it take off a little bit more," Nelson said.
This article has been published in americanbanker.com via Yahoo News.
