Getting Your Crypto Strategy Right

The case of Visa Inc is an interesting one. They gained a first mover’s advantage. Let’s dive in to know what they did.

“2015 has turned blockchain into something the industry has to live with. It is no longer a choice anymore. Recent news speculating about the identity of its creator and the formalization of virtual money as a commodity, just makes it more real than ever before”~Visa 

Back when financial services firms were thinking about crypto and the disruptions it could cause, Visa Inc. was on the move. In 2015, Visa closed a fundraising round with Chain, a company that works in the crypto space. Chain raised money from industry giants like Visa, Nasdaq, Citi, Capital One, Fiserv and Orange. 

Cut to October 2016, and Visa was already on the move. It introduced an international payments solution built on Chain’s blockchain platform. 

“The time has never been better for the global business community to take advantage of new payment technologies and improve some of the most fundamental processes needed to run their businesses,” said Jim McCarthy, executive vice president, Innovation and Strategic Partnerships, Visa Inc.

Visa took a giant leap when it filed a patent with USPTO in August 2017 for “Methods and Systems for Using Digital Signatures to Create Trusted Digital Asset Transfers”. 

Early Mover’s Advantage

Visa has strategically built up its capabilities for the new world, with a new face of money. And this strategy is now paying off—certain advantages of the early start accrued to the company. 

First, they were at the forefront of innovation in this field. When smaller startups were coming up with disruptive platforms, Visa invested in them. It then used its resources to come up with platforms. They successfully thwarted any attempts of the change in Visa as the intermediary. 

Second, they get a seat at the table. Building capabilities and creating knowledge helped them become a leader in the field. When governments worldwide and especially in the US discuss regulations, they get a seat at the table. They have a shot at getting favourable laws. 

Third, they generate new business opportunities. Visa is primarily a settlement based business. They now have the opportunity to expand and embrace the larger fintech space. This also includes advisory services for their clients. And as expected, they launched their consultancy services to help their clients adapt to crypto. They named American bank UMB as a client already using its crypto advisory services.

Visa’s Strategy is Paying Off

The results show a change in the business activities. From Oct. 1, 2020, to Sept. 30, 2021, the company processed $3.5 billion in digital currency transactions through its crypto-linked card schemes, said Nikola Plecas, Visa’s European crypto lead.

Cuy Sheffield told the BlockCrypto in July 2021 that they have some 50 partnerships, of which 16 were added from March’21 to July’21. 

Although, everything hasn’t been hunky-dory. Despite being a behemoth in the online debt market, it had to let go of the acquisition of Plaid amid antitrust questions. Later on, they acquired Swedish fintech startup Tink, very similar to Plaid.

Stock Performance

It remains to be seen how the investors will react to these steps. The latest results indicate a strong performance.

On Oct. 26, Visa beat Q4 estimates, thanks in large part to a rebound in cross-border transactions. Visa reported earnings of $1.62 per share, a 45% jump from the year-ago quarter, on sales of $6.6 billion, a 29% increase. Revenue rose 10% to $24.1 billion.

Payments volume grew 16% for all of 2021. Cross-border volumes also surged by 9% for the year. Processed transactions increased by 17% for the full year.

Digital payments — fueled by the rise of 5G networks — are a growth opportunity. Visa’s real-time push in payments technology has seen robust growth during the pandemic. Digital transactions in cryptocurrencies have also opened up a strong avenue for VISA. Further, it is expected that as more and more countries launch CBDCs, VISAs investments will fructify.

It would be interesting to see how competitors of Visa will catch up.