Visa Taps Onchain Credit for Stablecoin Card Settlement
Visa has introduced a new onchain lending solution to its card-settlement system, in partnership with Credit Coop. This innovative approach aims to help stablecoin card issuers cover the money they owe Visa each day, addressing a common challenge in the industry.
Addressing the Funding Gap
Stablecoin card issuers often face a significant funding gap, as they need to pay Visa before collecting money from their customers. This means they must maintain a cash reserve or borrow money to cover the difference. Credit Coop's onchain lending solution provides a more efficient and cost-effective way to address this issue.
How Onchain Lending Works
Credit Coop gives stablecoin card issuers access to stablecoin credit lines, which are funded by Visa's settlement data. Smart contracts automate the funding and repayment process as customer payments come in. This ensures that the issuer only pays back the amount they owe, minus any interest or fees.
Scaling Success
Visa has reported significant success with Credit Coop's onchain lending solution, with over $2.5 billion in volume financed since 2023. This has been achieved across 3,000+ borrows, 9,000+ repayments, and zero defaults. The addition of more lenders has also led to a reduction in borrowing costs for some programs, with some seeing a decrease of up to 30%.
Stablecoin Cards Boom
The adoption of onchain lending is closely tied to the rapid growth of Visa's stablecoin business. The company now has over 160 stablecoin-linked card programs, with settlement volume exceeding $20 billion on an annualized basis. This represents a year-over-year increase of over 15 times, highlighting the increasing demand for stablecoin-based payment solutions.
Implications and Next Steps
The introduction of onchain lending to Visa's card-settlement system has significant implications for the stablecoin industry. By providing a more efficient and cost-effective way to address the funding gap, Credit Coop's solution is likely to encourage further adoption of stablecoin-based payment solutions. As the industry continues to grow, it will be interesting to see how other companies respond to this innovation and whether onchain lending becomes a standard feature in the industry.
Visa's commitment to innovation and its willingness to explore new technologies are likely to continue driving growth in the stablecoin industry. As the company continues to expand its stablecoin business, it will be essential to monitor its progress and assess the impact of onchain lending on the industry as a whole.