A month ago, I warned that Visa (V -0.20%), Mastercard (MA -0.59%), American Express (AXP -0.39%), and Discover (DFS +0.00%) are in very real danger of losing their dominant position in the payments industry because of cryptocurrencies. The idea is that instead of "rails" created by credit card companies that can cost 2% to 3% per transaction and take days to settle, the payments industry will move to crypto rails, which will cost pennies and settle immediately. 

Solana (SOL -3.28%) Pay was the first salvo in this battle, showing just how easy it is to build on crypto rails. But late last week, we saw that crypto payments are being taken extremely seriously by payments giant Stripe. This could be the first move, and I wouldn't be surprised to see Block (SQ -0.11%) and others follow soon. 

Image source: Getty Images.

Stripe's big move

Below is the crypto payouts announcement from Stripe. 

Introducing crypto payouts: https://t.co/xJnpLmsBKn. pic.twitter.com/PJQ2oTaU7J

-- Stripe (@stripe) April 22, 2022

This initial announcement isn't actually payments by users on crypto rails; it's payouts to creators on Twitter using crypto rails, which will be used to pay freelancers and creators. But this is likely the first step. Stripe is starting with payouts on the Polygon (MATIC +0.00%) blockchain using USDC stablecoins but said it would expand to more blockchains soon. 

It's likely payouts will eventually move to payments in crypto. This would put crypto rails on both ends of the transaction and potentially make it instant. 

I also think it's notable that Twitter (TWTR +0.00%) is the first place this system is being tested. Twitter is where a lot of the cryptocurrency and NFT discussions happen today, so it could be angling to be a more critical place for the crypto market in the future. 

How payment systems will use cryptocurrency

It's important to point out the portions of the value chain that are being disrupted by cryptocurrencies. In this case, Twitter and Stripe are still involved in payments, but the credit card rails are being replaced by cryptocurrencies. This will be disruptive to credit card companies but shouldn't be all that disruptive to users. Here's how Stripe puts it: 

With crypto payouts for Connect, Twitter will make it possible for creators who opt in to have their earnings paid out to a cryptocurrency wallet. Stripe will handle all crypto-related complexity and operations. No code changes are required, and platforms can avoid taking on the challenges of acquiring, storing, or transferring crypto themselves.

The fact that the crypto rails would be mostly invisible to users would be a huge deal. If cryptocurrency rails are going to be commonplace, they need to be simple and largely invisible to users. Stripe is showing that's the plan. 

I think we will see Block's Square payments network move in this direction. Merchants using Block would love to get their money instantly rather than waiting for a bank transfer, and this could be a way to do that. We could even see payment fees shrink over time if crypto rails grow and replace credit cards. 

A big part of crypto's future

Cryptocurrencies have largely been used for trading up to now, but their potential is to become a disruptive part of the digital world. I think payments will be a big part of that, and crypto rails replacing credit card rails makes a lot of sense. Stripe is taking a step in that direction, and I expect to see Block and others follow soon. The disruption coming to credit card companies may be here sooner than expected.