Martina Hund-Mejean, chief financial officer at MasterCard, said on Wednesday that the recent dip in cross-border transaction volume in the first quarter of 2018 is the outcome of bank’s decision to ban the use of its payment cards in the purchase of digital currencies.
She said, that although the volume of cross-border payments rose 19 percent during the first quarter of 2018 yet it was 2 percent less in comparison to the first quarter of 2017. Seeking Alpha recently published an earnings call transcript which became the base for Martina’s comments. According to her, the volume fell down “in part due to the drop [in] crypto wallet funding.”
She added, “So the issue in this, first of all, in terms of the stacks, on the cross-border volume growth, the cryptocurrency funding or the crypto wallet funding really was 1 percent.” She also said that this 1 percent was the same for the fourth quarter of 2017 as well as first quarter 2018.
She explained that several US banks have declined the processing of payments at crypto exchanges. The cards issued by MasterCard and Visa cannot be used for buying cryptocurrencies now. All ICOs and crypto exchanges will now be a distant dream for the card holders. This is an important reason why there is a significant decline in the volume of usage during this time.
Several major players in the financial sector have banned the use of their cards to purchase virtual currencies. They claim that trade in digital currencies includes a high percentage credit risk due to its price volatility. Few of the banks are Bank of America, Capital One, JPMorgan Chase, Citi, and Bank of Montreal. Taking the theory one step further, Ajay Banga, chief executive officer MasterCard, said that new regulations and a state of confusion revolving around exchanges have boosted the decline in volume.
Moreover, the fall in interest rates has not been a support, he continued, saying “right now there’s a little less interest than there was in the latter part of the fourth quarter and the first quarter.” He added that MasterCard does not want to involve digital currencies as a part of its earnings. He concluded, “We actually said that this is not something we count on because we just don’t know how to predict it or we don’t even want to count it.”
On the other hand, MasterCard is not stepping back from the use of blockchain technology. As per latest reports, the payment giant is trying to patent a system that quickly adds new nodes to a blockchain network. MasterCard’s idea is to amplify the speed nodes in a blockchain gets connected.
The firm said, “Contain thousands, millions, or billions of blocks, each of which must be verified by the new node prior to the generation and addition of new blocks to the blockchain.”
It is safe to say that blockchain technology has a bright future, especially in the financial sector. But, digital currencies are still going through a war to establish a value for themselves. The dip suggests that credit cards were being used in a huge number to facilitate crypto transactions. Now the question is- can crypto be a new way to earn or it will be a fringe headache for these companies?