Written by: Vaidik Mandloi

Translated by: Luffy, Foresight News

Did you know? In July, cryptocurrency credit card spending exceeded $759 million, with the number of transactions reaching 9 million. This is almost two and a half times that of the same period last year. Moreover, over 90% of the transaction volume was still paid using Visa cards.

Almost all cryptocurrency card projects are telling the same story: relying on stablecoin payment channels to bypass card organization fees and return the saved costs to merchants. Previously, when we analyzed Stripe's establishment of a cross-border payment link based on stablecoins, we discussed this logic.

To this end, I delved into a core question: what would actually happen if we attempted to set aside traditional card organizations? Can removing Visa and Mastercard really save costs for merchants? Which layer of the payment architecture can stablecoins ultimately replace?

The conclusion I reached was completely unexpected.

How the Payment System Operates

To find the answer, we first need to clarify where the fees actually flow when consumers swipe their cards for payments. I first realized a common misconception: many, including many in the crypto industry, believe that card organizations like Visa take the largest cut of the fees.

In fact, this is not the case. Merchants processing a $100 credit card transaction need to pay about a 2.2% merchant discount rate, totaling $2.2. The key point is that this $2.2 does not end up in Visa's pocket; rather, it is distributed among three parties, and the distribution ratio is not even.

• The largest share, about $1.75, goes to the issuing bank, the institution that issues the credit card to the consumer. This fee is called the interchange fee and accounts for 70%-80% of the total merchant fees.
• Next, the merchant-side payment processor (acquiring institution) takes a service fee of $0.30–0.70.
• Finally, there is the card organization, Visa/Mastercard, which only charges an assessment fee of $0.13–0.18, about 7%-9% of the merchant's total expenditure.

This means that if Visa is simply removed, the fee eliminated is merely the smallest one in the entire chain. Visa's low fee structure has underlying reasons.

Visa does not extend credit to anyone, meaning it does not have to bear credit risks, chargebacks, or fraud losses. In reality, Visa does not even participate in fund transfers. It is solely an information transmission network, activated only when a user swipes their card at a merchant terminal. Visa's role is to relay authorization information bi-directionally between the merchant terminal and the issuing bank and to establish the operational rules for the entire system. The institution that truly bears the most significant responsibilities is the issuing bank.

The issuing bank provides credit to consumers, bears the risk of bad debts; simultaneously, it assumes the opportunity cost of funds between a consumer's purchase and the bill's repayment date, and subsidizes card reward programs through interchange fees to attract users to use the card.

This creates a very attractive business model for Visa. In 2025, Visa processed $14.2 trillion in payment transactions, amounting to 257.5 billion transactions, generating $40 billion in net income, with a net profit margin close to 50%. It earns about $0.13 on average for each transaction, and this constitutes its entire profit source. Visa's position as one of the highest valued companies globally is not due to high per transaction fees but due to processing hundreds of billions of transactions annually with an almost zero marginal cost and not bearing credit risk at all.

Next, we enter the most challenging real issue regarding stablecoin debit cards.

All stablecoin debit cards on the market are classified as debit card products. Before a transaction occurs, the funds are already stored in the user's wallet in the form of USDC or USDT. There are no periods of fund occupation, nor do revolving credits accumulate interest income. This places these cards in a completely different economic model.

Additionally, the U.S. Congress passed the Durbin Amendment in 2010, which limits the interchange fee for debit cards issued by banks with assets exceeding $10 billion to a maximum of $0.21 per transaction + 0.05%. The vast majority of stablecoin debit card solutions choose to partner with smaller cooperative banks (digital banks) with assets below the $10 billion threshold, thereby not being subject to the Durbin Act; this is also a commonly adopted model in the fintech industry.

The current average interchange fee for unrestricted dual-information network debit cards is about $0.62 per transaction. A clear comparison shows that for a $100 transaction, a reward credit card can generate a total income of $2.2; whereas a stablecoin debit card, even if subject to higher exemption rates, generates a total income of only $0.62. The project team must also pay card organization fees, processing fees, cooperative bank costs from this 62 cents, while also covering fraud losses and operating expenses before considering any benefit to merchants.

What Can Stablecoins Truly Replace?

As seen, the fees saved by eliminating Visa are negligible, and the profitability space for operating stablecoin debit cards relying on interchange fees is extremely narrow. However, the value of stablecoin payments may not lie in saving trivial card organization fees but in the potential to replace more core links within the payment architecture.

To this end, I revisited a previous article titled "Why Stripe Built Its Own Chain", which breaks down a cross-border payment into seven main fee segments: acceptance, process dispatch, licensing compliance, custody, foreign exchange, issuing, clearing and settlement. I compared domestic card transactions against this seven-layer structure to analyze which segments would experience substantial changes.

From the merchant's perspective, the transaction acceptance layer remains completely unchanged. The process remains the same: the merchant is equipped with terminals, users swipe cards and must still pay merchant discount rates to the acquiring institution. Merchants cannot even perceive that the sources of funds behind the card are USDC. In the merchant's bill, this transaction is indistinguishable from a regular Visa transaction. Similarly, the process dispatch layer still goes through Visa or Mastercard, and the issuing stage continues to rely on cooperative banks and card organization BIN numbers. Financial technology companies have been using this model long before the advent of stablecoins, and no fundamental innovation has occurred.

What truly changes is the backend processes, which are the easiest to overlook.

The clearing and settlement layer is the only one where stablecoins can bring about fundamental change. In the traditional model, the transaction clearing between issuing banks and card organizations operates on a T+2 cycle, compounded by weekends and batch processing. To optimize this pain point, service providers like Rain support end-of-day settlements with Visa for stablecoins; Mastercard has also begun accepting stablecoins like USDC, PYUSD, and RLUSD for intra-day settlements. This significantly compresses the traditional T+2 settlement to near real-time clearing, freeing the operational funds that were previously occupied by issuing banks.

However, the benefits of optimizing operational funds go entirely to the issuing institutions. The discount rate paid by merchants will not decrease due to expedited settlements, and consumers' checkout experiences will not feel any difference.

The sole beneficiary of T+0 settlements with stablecoins is the card operator, which no longer needs to front two days' worth of funds. The innovation brought by stablecoins essentially helps issuing institutions optimize fund management. While there are considerable gains once scaled up, it does not provide additional benefits to merchants or consumers. At the same time, Visa has no incentive to lower transaction fees—the cost of occupation for settlement funds has never been borne by Visa, and the pressure has always rested on the issuing banks. Even if stablecoin settlements reduce the issuing banks' funding costs, Visa's costs remain unchanged, and therefore merchant rates naturally stay the same.

It is worth noting that Visa and Mastercard have not opposed stablecoin settlements; rather, they have actively integrated them into their networks. Since 2021, Visa has supported settling with USDC on the Ethereum and Solana networks, and the current annualized settlement volume has reached $7 billion. A few months ago, Mastercard acquired BVNK to expand its stablecoin infrastructure. Both card organizations have even stated: "Stablecoins will not disrupt the existing payment landscape; instead, they will reinforce this system."

Major card organizations have not been disrupted or replaced by stablecoins; on the contrary, they have absorbed stablecoins as an upgrade solution for their own settlement layers. Every stablecoin debit card operating on Visa claims to disrupt Visa while contributing to transaction volumes and continually paying fees.

Additionally, it's worth mentioning that in the related articles about Stripe, we noted that stablecoins can indeed lower cross-border payment costs by eliminating multiple layers of intermediary banks; this argument stands. However, it's crucial to distinguish the scenarios: the core pain point in cross-border payments is currency exchange and multiple intermediaries, while domestic consumption follows a completely different fee structure. Applying the validated logic of cross-border payments directly to domestic consumption scenarios does not align with the true cost structure.

The logic of stablecoins empowering cross-border payments is very solid, but once applied to domestic consumption and analyzing the flow of fees, this narrative becomes challenging to uphold.

What can stablecoins ultimately replace? Objectively speaking, the answer is the clearing and settlement stages and cross-border foreign exchange. It transforms the underlying fund channels behind transactions. However, the biggest source of costs in domestic card transactions has never been based on the foundational settlement infrastructure.