Here is the article from a16z about how stablecoins will change daily payments:
https://a16zcrypto.com/posts/article/how-stablecoins-will-eat-payments/
Their arguments look promising at first glance, especially about how low-margin business like grocery stores can immediately double their margin by simply getting rid of the 2-3% credit card transaction fees if they switch to stable coins.
Now, with only my consumer brain, does what they say actually make sense? Do merchants actually want to get rid of the 2-3% transaction fees?
They view these fees as a mere burden imposed to merchants by the financial system, however, I think the fees are actually the financial system helping the merchants. These fees enable consumers to potentially spend more than what they have, and also earn rewards (sometimes tied directly to particular stores, so a essentially a loyalty program) by spending. Hence I think paying these high transaction fees is essential in driving up sales.
Here is the dilemma of stablecoins in daily transactions. Sure we can eliminate the high transaction fees, and we can even setup a service for consumers to borrow stablecoins, but if transaction fees are removed, who is going to pay the rewards (and loyalty program) modern CC carry? I feel as a consumer this is a very hard sell. Merchants can force adoption of stablecoin payments if they are desperate to save the transaction fees, but isn't this just going back to the age when financial systems weren't developed enough to help merchants acquire and maintain customers ? Also, there are already ways to pay with low transaction fees like a debit card or third-party app.
The argument of a $2 coffee is convincing, on the ground that transaction fees can make up as much as 15% of the total transaction. However, there is almost no $2 coffee in the real world, and for those really low-value transactions normally the use of a credit card is just not allowed.
There is a very similar argument from the founder of coinbase 13 years ago (he is really way ahead): https://news.ycombinator.com/item?id=3754664
but again, are these just pipe dreams? Am I missing something?
Except that you are now at the mercy of MasterCard/Visa. Sure it might not be a problem now, but things can change quickly. 14 years ago they turned off Wikileaks donations because it violated their "moral standard" while still allowing donations on the Klu Klux Klan home site. They often impose arbitrary rules on adult sites to the point where many small vendors can't keep up, and that is ignoring the 20% fee that they charge for being at high risk of chargebacks.
> who is going to pay the rewards (and loyalty program) modern CC carry?
These loyalty programs are simply offsetting some of the existing costs. If you remove the transaction fees entirely, more money would be saved than leaving them in combination with a rewards program. Maybe that is a hard sell from a Product PoV, but it is not like the rewards are coming from nowhere.
> but isn't this just going back to the age when financial systems weren't developed enough to help merchants acquire and maintain customers ?
Like when the card companies used aggressive tactics and lobbying to prevent vendors from upcharging card payments to offset the costs of transaction fees?
It sounds like you are institutionalized in the sense that you are familiar with all the existing institutions and can't imagine any changes.
edit: Everything I said is more generally in line with cryptocurrencies however. The biggest advantage of stablecoins is for the minter / maintainers. It is a relatively low cost product that can generate a boat load of interest if you can garner enough interest like USDT and USDC have. The only advantage to users is that the prices are (ideally) pegged and less impacted by wild speculation that has been rampant in the cryptocurrency space.