Visa's Latest News Shows It's a 'Stablecoin Winner' — Barrons.com
By Teresa RivasVisa already boasts that it's everywhere you want to be. That now includes being at the front of the pack of stablecoin champions.Stablecoins are digital tokens that represent a fixed amount of U.S. dollars or another fiat currency, and many investors are betting they will become the next big thing in payments. On Tuesday, Visa announced a pilot stablecoin program for its Visa Direct platform that allows financial institutions to use pre-funded stablecoins.The idea is institutions can make cross-border payments more quickly and easily. It's also less capital-intensive for clients. Instead of having funds in accounts tied to all the markets where they operate in anticipation of withdrawals, businesses can move money in real time where it's needed, even outside of regular business hours.The news is the latest evidence that "Visa could be one of the biggest stablecoin winners," writes Mizuho Securities analyst Dan Dolev in a note Tuesday.He sees two main reasons to bet on Visa's dominance. The first is the ubiquity of the Visa Direct payment platform, which he estimates has notched a compound annual growth rate of some 50% since 2016. That means the platform accounts for as much as a fifth of Visa's global debit volume — equivalent to more than $1 trillion.The second is the number of stablecoins — which include not only U.S. dollar proxies like Tether (USDT), USDC, and others, but also initiatives from other governments — that will want a well-established and reliable partner for transactions. As stablecoins proliferate, "a centralized pole like Visa could offer tremendous competitive edge," Dolev writes.The analyst reiterated an Outperform rating on Visa following the news, and a $425 price target, compared with a recent $341.Although the announcement is a positive development, investors don't have to worry too much about stablecoins displacing Visa and Mastercard, he says. Consumer behavior is hard to change, and plenty of financial transactions are still underpinned by traditional credit, Dolev adds.In short, credit and debit cards, dominated by Visa and Mastercard, are likely to remain central to American consumers' lives, as The Wall Street Journal argued this summer.Plenty of analysts agree, with nearly 80% of those tracked by FactSet rating Visa at Buy or the equivalent, with an average price target of $395, representing about 15% upside from current levels.Visa's stablecoin effort isn't something average consumers will notice. But it's more evidence that no matter how the financial landscape changes, Visa will likely remain at the heart of it.Write to Teresa Rivas at [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.