Banking

PayPal, Visa chart a course for crypto that banks could follow

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PayPal and Visa separately unveiled ways for consumers to spend cryptocurrency, demonstrating how banks can safely handle the notoriously volatile digital currencies.

PayPal’s new Checkout with Crypto service enables customers to make online purchases at millions of online merchants with four popular cryptocurrencies, giving consumers a way to spend the crypto they store in their PayPal accounts. The move follows PayPal’s decision last fall to let U.S. customers buy, hold and sell cryptocurrencies in their PayPal account for a fee.

Similarly, Visa said this week that it would pilot cryptocurrency settlements on its network using a dollar-backed stablecoin. Visa explained the move as showcasing its ability to work with crypto-native fintechs.

Now PayPal could accelerate revenue it earns handling crypto by giving consumers more reasons to store crypto in PayPal’s vault. Because PayPal handles the currency conversion at the point of purchase, it’s the consumer — not a merchant or bank or even PayPal itself — that takes responsibility for the fluctuating value of the currency they choose.

PayPal CEO Dan Schulman reportedly used his company’s Checkout with Crypto feature to purchase a pair of ostrich cowboy boots.

Bloomberg

PayPal’s checkout service operates within its own ecosystem, but banks and card networks are likely feeling rising pressure to develop cryptocurrency strategies in the wake of PayPal’s Tuesday announcement, experts say.

“Visa has taken action by enabling crypto settlement via a stable coin denominated in U.S. dollars, and still that’s a tough integration to manage risk properly,” said Tim Sloane, vice president of payments innovation at Mercator Advisory Group.

Card networks and banks itching to route crypto to their rails will likely take baby steps, Sloane said.

“The fact that Visa is using a digital-asset bank like Anchorage as its settlement partner might finally convince banks that they can safely deploy crypto custody solutions,” Sloane said.

PayPal is rolling out the new service in the U.S., with all transactions settled in U.S. dollars and converted to applicable currency at standard PayPal conversion rates. The feature is automatically added at checkout for all PayPal merchants, who will see no changes in the way they’re paid, with transactions settled through the usual checkout flow, according to PayPal.

Checkout with Crypto supports purchases in bitcoin, Bitcoin Cash, Ethereum and Litecoin, and the option appears beside PayPal’s range of checkout options including a PayPal balance, a bank account, a payment card or credit card loyalty rewards points from the nation’s top card issuers. Consumers pay no fee for checking out with crypto.

PayPal built the foundation for Checkout with Crypto through a partnership with Paxos announced last fall. PayPal also recently purchased Curv to bolster its tech stack around managing cryptocurrencies.

PayPal CEO Dan Schulman reportedly used the new feature to purchase a pair of ostrich cowboy boots using crypto.

Existing cryptocurrency commerce specialists see PayPal’s entrance into the niche as a boon for broader consumer adoption and potential anxiety for banks watching from the sidelines.

“Demand for crypto payment use cases is global, and users are itching to try out payment solutions as soon as merchants can offer them,” said Peter Jensen, CEO of Las Vegas-based RocketFuel Blockchain, which provides one-click online payment options using bitcoin and other currencies.

RocketFuel’s core user base is predominantly males ages 18 to 46, Jensen said.



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