Please ensure Javascript is enabled for purposes of website accessibility

Ask a Fool: Could Cryptocurrencies Hurt Companies Like Visa, PayPal, and Square?

By Matthew Frankel, CFP® - Aug 9, 2019 at 12:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If people start using cryptocurrencies for purchases, what would it mean for these payment giants?

Q: Major payment processing specialists like Visa, PayPal, and Square have outperformed the broader stock market by a wide margin in recent years. If cryptocurrencies like bitcoin eventually start to gain traction as methods of payment, could this potentially hurt these companies?

It might seem like if more people started using cryptocurrencies to pay for goods and services, there would be less of a need for the services these companies provide -- and this could be true to some extent, at least at first. For example, if someone uses bitcoin stored in a Coinbase wallet to pay another person who also uses a wallet stored on a cryptocurrency exchange, none of these companies are seeing a dime in revenue.

However, I think that it's important to realize that the payment processing industry and cryptocurrencies aren't really two distinct concepts.

If cryptocurrencies start to gain serious traction, the major payments companies will be right there to cash in on the trend. Square (SQ -0.35%) has already integrated bitcoin into its ecosystem and wants to make it as easy as possible for its merchants to accept cryptocurrencies as payment. PayPal (PYPL 1.51%), Visa (V 3.60%), Mastercard and others are all partnering with Facebook on its new Libra cryptocurrency, so if it starts to gain serious real-world momentum, these companies will benefit.

In other words, most of the major fintech players are well-aware of the long-term potential of cryptocurrencies and are already taking steps to ensure that they'll get a piece of the action if the industry really starts to take off. So if cryptocurrencies become a widely used payment method, I think it will do more good than harm to the profitability of these companies.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Visa Inc. Stock Quote
Visa Inc.
V
$206.19 (3.60%) $7.17
PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
PYPL
$81.76 (1.51%) $1.22
Block, Inc. Stock Quote
Block, Inc.
SQ
$83.15 (-0.35%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.