Visa & Mastercard, Designing Next-Gen Payment Systems

Key Takeaways

• Visa and Mastercard are global payment network operators, and it's no exaggeration to say they virtually dominate the global payments market. The total global transaction volume is estimated at $20 trillion in 2024. If, in the future, card payments are processed via blockchain networks, it would present a massive opportunity for the blockchain and stablecoin industries.
  

• While the frontend of today’s payment systems has greatly improved thanks to various fintech companies, the backend that actually processes transactions still relies on outdated systems. Problems persist with settlement and cross-border payments, and blockchain offers a promising solution to these issues.
  

• Both Visa and Mastercard unveiled their roadmaps for blockchain and stablecoin adoption in April this year. Both companies are rolling out initiatives in the following areas: 1) stablecoin-linked card services, 2) stablecoin-based settlement systems, 3) P2P international remittances, and 4) institutional tokenization platforms. It remains to be seen who will take the lead in the Web3 payments market.

Visardilo Crocodilo and Tralalero Mastercara, characters symbolizing payment brainrot, are about to wage war over the next-generation payment system. That is right. At this point, for financial companies, adopting blockchain and stablecoin-related technologies is a no brainer.

1. Background - Can Blockchain Be Used for Payments?

1.1 The Two Giants of Traditional Payments

Source: Statista and Nilson

Visa and Mastercard are leading global payment network companies. As of 2024, Visa holds 39 percent and Mastercard 24 percent of the global payment market. Considering that UnionPay mainly handles domestic transactions based on China’s domestic market, it is no exaggeration to say that Visa and Mastercard essentially dominate the global payment landscape.

They generate enormous profits by providing card payment networks that process transactions between consumers and merchants, and mediate the settlement between issuers and acquirers while collecting small fees. (We will explore the payment process in more detail below.) In fact, Visa and Mastercard reported operating margins of 67 percent and 57 percent respectively in 2023. This reflects the characteristics of a low-fixed-cost network business built on massive transaction volume.

According to data from Upgraded Points, card network payment volume in the United States alone is estimated at approximately 10.5 trillion dollars in 2024. When combined with UnionPay’s domestic volume in China, the global transaction volume is projected at around 20 trillion dollars. If, in the future, card payment processing is done via blockchain networks, this would present an enormous opportunity for the blockchain and stablecoin industries.

1.2 Card Payment Process

Visa and Mastercard both operate open card payment networks. This involves a four-party model including issuers, acquirers, merchants, and cardholders. Visa and Mastercard do not issue cards or provide loans directly. Instead, they only offer the payment network. The basic process of the four-party model, widely used in the United States, is as follows:

1. Payment Request (D+0): When the cardholder makes a purchase at a merchant, they initiate the payment using a card. The payment information is passed from the merchant to the acquirer to the card network and finally to the issuer.

2. Payment Authorization (D+0): The issuer checks the cardholder’s credit limit, validity, and any signs of fraudulent activity, then decides whether to approve the payment. The approval is relayed back to the merchant in reverse order, completing the transaction.

3. Settlement (D+3): The issuer pays the acquirer after deducting the settlement fee. The acquirer then pays the merchant after deducting the merchant fee. The card network collects network fees from both the issuer and acquirer for each transaction.

4. Billing and Repayment (D+30): The cardholder receives a billing statement from the issuer the following month and repays the amount due.

1.3 Can Blockchain Be Used for Payments?

Over the past several decades, a wide variety of fintech services related to payments have emerged, starting with PayPal, followed by Stripe, Square, Apple Pay, and Google Pay. These services have brought innovation to the frontend, allowing users to complete payments much more easily and quickly than in the past. Interestingly, however, the backend processes that actually execute the payments have largely remained unchanged. As a result, there are still several problems with existing payment systems.

The first is settlement time. In traditional payment processes, most merchants and acquirers handle transactions in daily batches. This batch processing typically occurs once a day. Furthermore, settlements are usually processed only on business days, so if holidays or weekends are involved, the overall settlement time can be extended.

The second issue is the high fees associated with international transactions. When the country of the card issuer differs from that of the merchant, cross-border fund transfers are required during authorization and settlement. This adds fees such as cross-border transaction fees of around 1 percent and foreign exchange fees of another 1 percent, making international payments more expensive than domestic ones.

There is a system that can solve both of these problems and that is blockchain. Because blockchain is a decentralized network that operates 24 hours a day, seven days a week and is not restricted by national borders, it enables fast settlements and lower fees even for international transactions. Thanks to these advantages, Visa and Mastercard have recently become very active in leveraging stablecoins and blockchain in their payment networks. How exactly are they utilizing blockchain?

2. Takeaways -The War Has Begun

2.1 Visa’s Four Strategies

Source: Visa

Visa operates one of the world’s largest global payment networks, VisaNet, which can process up to 65,000 transactions per second and supports payments at over 150 million merchants in more than 200 countries. Visa considers stablecoins to be a core component of future digital payment systems and in April this year announced four concrete strategic initiatives to integrate them into existing payment networks.

The first is modernization of settlement infrastructure. Since 2021, Visa has conducted a pilot program to settle payments in USDC through its existing VisaNet. To date, more than 225 million dollars have been settled. Traditionally, issuers had to remit settlement funds to Visa in US dollars. Now, they can settle directly in USDC as well. This results in improved settlement efficiency and reduced cross-border transaction fees.

Crypto.com, for example, offers Crypto.com Visa cards that allow users to pay using their crypto accounts. In the past, such crypto-native companies had to convert their digital assets into fiat currencies like the dollar to process payments, which was time-consuming and costly. Now, they can use USDC directly for settlement. In collaboration with Anchorage, Visa has created custody accounts to securely store stablecoins. Card issuers like Crypto.com can transfer stablecoins to these accounts on the Ethereum network to complete settlements.

By eliminating the need to convert crypto to fiat and send cross-border transfers, Crypto.com was able to reduce the average prefunding time from 8 days to 4 days and cut FX fees to 20 to 30 basis points.

Visa not only enabled issuers to settle in USDC but also introduced a feature that allows acquirers to settle directly in USDC. In September 2023, Visa built settlement infrastructure for acquirers like Worldpay and Nuvei, allowing them to receive USDC via Ethereum and Solana networks. Acquirers can pass on USDC to merchants or convert it to fiat as needed.

In summary, Visa has successfully built a pipeline enabling issuers to settle with acquirers in USDC rather than dollars through the Visa network. Going forward, Visa plans to expand this stablecoin settlement system to more partners and regions, implement 24/7 real-time settlement, and support various blockchains and stablecoins.

The second is strengthening global remittance infrastructure. Visa already supports large-scale cross-border transactions using the VisaNet infrastructure. One of its services, Visa Direct, allows peer-to-peer money transfers between friends, businesses, and customers using cards, wallets, and account numbers via VisaNet. Visa plans to improve the efficiency of global remittances by integrating stablecoins into Visa Direct. Additionally, Visa recently invested in BVNK, a startup developing stablecoin infrastructure for enterprises, to expand its stablecoin capabilities not just in retail but across the enterprise ecosystem.

The third is implementation of programmable digital money. One of the major advantages of stablecoins compared to traditional cash is their ability to leverage smart contracts on blockchain. Visa is paying close attention to the potential of smart contract-based automated financial services and is leading the way by announcing the “Visa Tokenized Asset Platform (VTAP)” in October 2024.

VTAP is a blockchain-based financial infrastructure that enables banks and financial institutions to issue and manage fiat-based digital tokens (such as stablecoins and tokenized deposits). Since these features are provided through Visa APIs, integration with existing financial systems is easy. Tokens issued through VTAP can be used with smart contracts, making it possible to automate complex processes like conditional payments or loans to customers.

VTAP has not yet been publicly launched and is currently operating in a sandbox environment. Initially, it was tested with the Spanish bank BBVA for token issuance, transfer, and redemption functions. According to the roadmap, Visa plans to launch a pilot program using the Ethereum public blockchain for real customers starting in 2025.

The fourth is development of stablecoin on and off-ramp cards. Visa is enabling card issuers to offer on and off-ramp services through stablecoin-linked cards. So far, Visa has processed over 100 billion dollars in crypto purchases and 25 billion dollars in crypto spending via its cards. To expand this ecosystem, Visa is collaborating with stablecoin card infrastructure companies such as Bridge, Baanx, and Rain.

Bridge is a stablecoin infrastructure platform acquired by Stripe. Recently, Bridge collaborated with Visa to announce a card issuing solution that enables real-world payments using stablecoins. Fintech companies can use Bridge’s simple API solution to provide customers with card services linked to stablecoins. Cardholders can pay with their stablecoin balances, and Bridge converts the stablecoins to cash and pays merchants. Initially, this service is supported in Argentina, Colombia, Ecuador, Mexico, Peru, and Chile, with plans to gradually expand to Europe, Africa, and Asia.

Baanx is a fintech company based in London, founded in 2018, that offers various crypto-related services connecting traditional finance with digital assets. In April 2025, Baanx announced a partnership with Visa to launch a stablecoin payment card that allows users to pay directly with USDC from their self-custodied crypto wallets. During the payment process, USDC is sent in real time to Baanx through smart contracts, and Baanx converts it to fiat currency for merchant settlement.

Rain is a New York-based fintech company founded in 2021 that operates a global card issuing platform using stablecoins. Rain also provides APIs to easily issue Visa cards linked to stablecoins and offers various financial services such as 24/7 payment settlement using USDC, tokenization of credit card receivables, and automation of settlement processes through smart contracts.

2.2 Mastercard’s End-to-End Solution

Source: Mastercard

Mastercard, like Visa, is one of the leading companies in the global payment network space. Unlike Visa’s VisaNet, which boasts high processing capacity through a centralized network, Mastercard processes payments via Banknet, a robust structure supported by over 1,000 data centers distributed worldwide. On April 28, 2025, Mastercard announced that it had built end-to-end infrastructure covering the entire stablecoin-based payment ecosystem, from wallets to checkouts.

The first is card issuance and payment support linked to crypto wallets. Mastercard collaborates with crypto wallets such as MetaMask, crypto exchanges like Kraken, Gemini, Bybit, Crypto.com, Binance, and OKX, and fintech startups like Monavate and Bleap to provide these services.

• MetaMask partnered with Mastercard and Baanx to launch the MetaMask Card, which allows users to make card payments using crypto assets stored in MetaMask. Settlement on the backend uses Monavate’s solution, which connects the Ethereum network with Mastercard’s Banknet by converting crypto into fiat currency. The MetaMask Card will initially be supported in Argentina, Brazil, Colombia, Mexico, Switzerland, the United Kingdom, and the United States.

• Mastercard also works with the aforementioned crypto exchanges to support cards that allow users to make payments using stablecoins stored in their accounts.

The second is USDC settlement support for merchants. Even in stablecoin-based payments, merchants typically prefer to be settled in fiat currency. However, if the merchant desires, Mastercard allows settlement in USDC through partnerships with Nuvei and Circle. In addition to USDC, Mastercard also supports settlement of stablecoins issued by Paxos, through collaboration with Paxos.

The third is on-chain remittance support. Sending stablecoins via blockchain is simple, fast, and low cost. However, applying it to real life poses issues related to user experience, security, and regulatory compliance. To address this, Mastercard supports the Mastercard Crypto Credential service, which enables crypto exchange users to create aliases through a verification process and send stablecoins conveniently using those aliases.

This eliminates the need for users to enter complex crypto wallet addresses, improving the overall user experience. Furthermore, if the recipient’s wallet does not support the specific crypto or blockchain before the transfer, the transaction is blocked in advance to prevent asset loss. On the regulatory side, Mastercard automatically exchanges Travel Rule data required for international remittances, meeting compliance requirements and ensuring transparency. Exchanges that currently support Mastercard Crypto Credential include Wirex, Bit2Me, and Mercado Bitcoin. The service is available in Latin American countries such as Argentina, Brazil, Chile, Mexico, and Peru, as well as European countries like Spain, Switzerland, and France.

The fourth is provision of a tokenization platform for enterprises. Mastercard’s Multi-Token Network (MTN) is a private blockchain-based service that allows financial institutions and businesses to issue, burn, and manage tokens while facilitating borderless transactions in real time. Below are examples of how MTN is being integrated.

• Ondo Finance tokenized its short-term bond fund (OUSG), which is based on U.S. Treasuries, and integrated it into MTN. This allows enterprises to purchase and redeem OUSG in real time 24 hours a day without relying on traditional financial infrastructure, while earning stable yields.

• JP Morgan integrated Kinexys, its own blockchain-based payment system, with MTN to support real-time corporate payments.

• In May 2024, Standard Chartered conducted a pilot project using MTN to tokenize and trade carbon credits as a proof of concept.

2.3 The Time to Seize Web3 Payment Dominance

Recently, due to the pro-crypto stance of the U.S. administration, there has been growing momentum across multiple industries to adopt blockchain and stablecoins. Since one of the core functions of blockchain networks is financial infrastructure, blockchain technology naturally appeals to payment network companies like Visa and Mastercard. These companies are actively developing initiatives to build next-generation payment infrastructure.

What is interesting is that both Visa and Mastercard published initiative articles on blockchain and stablecoin-based payment systems around April 2025 (Visa’s role in stablecoins - Apr. 30, 2025 / Mastercard unveils end-to-end capabilities to power stablecoin transactions - Apr. 28, 2025). Both companies emphasized the same four areas 1) stablecoin-linked card services, 2) institutional tokenization platforms, 3) stablecoin settlement systems, and 4) P2P remittances. This suggests that the two companies are competing for dominance in the Web3 payments market.

So can the adoption of blockchain-based payment systems bring a major disruption to current market share and competition dynamics? I believe the next-generation system will bring significant changes to the payment infrastructure itself but will not greatly alter the market share or competitive structure. Blockchain-based payment systems will improve efficiency in settlement and international transactions, which will help companies with revenue models and competitiveness. However, what ultimately determines market share in the payments industry is business and marketing relationships with merchants, acquirers, and issuers. These relationships have been entrenched over decades, so I do not believe blockchain adoption will significantly shift the competitive landscape.

3. Resource

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• Mastercard unveils end-to-end capabilities to power stablecoin transactions – from wallets to checkouts

• Visa’s role in stablecoins