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Will Payments Tech’s Q1 Crypto Exuberance Create Q2 Hangover?

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It’s been a rough couple of months for the crypto, with a stablecoin’s $48 billion collapse helping send bitcoin bumping below $20,000 for several weeks, wiping out all the gains made in the bull markets of 2021 — and a lot of public enthusiasm along with them.

For the companies that have invested heavily to bring crypto payments from an obscurity to a growing way for merchants to sell their goods while attracting the growing number of customers who interested in spending their crypto, the timing has got to be frustrating.

Especially because the customers are there. According to PYMNTS’ U.S. Crypto Consumer study, “more than one-quarter of high-income consumers say they are ‘very’ or ‘extremely’ likely to switch” to merchants who accept crypto payments.

See also: Crypto Investments Can Turn Black to Red and Back Overnight, but Owners Still Want to Pay

Over the next few weeks, seven bellwethers in payments tech will reveal their second-quarter results — potentially giving a fair bit of insight on how the current crypto crash has affected people willingness to spend bitcoin, ether, bitcoin cash, litecoin, and even meme-born dogecoin at checkout. To say nothing of giving a temperature check on how eager businesses themselves are to focus on crypto right now.

So with that in mind, it’s worth looking at what they said back in Q1, when crypto was down certainly — bitcoin was roughly $46,000 at the end of March, down about one-third — but not nearly to the extent it is now, which at $23,000 is roughly 67%.

Bakkt

At the time, Bakkt CEO Gavin Michael opened his earnings call by calling crypto one of the company’s core pillars and saying it “has proven that it has staying power and we’re helping businesses play catch-up.”

The company was just launching its Bakkt Crypto Connect product, allowing banks to offer seamless crypto buying and selling in their “trusted banking environment — rather than watching deposits flow out of their ecosystem to crypto exchanges.” That lets banks hold customer attention and gain the branding benefit of offering a desired service, he said, pointing to critical partnerships with platforms including Fiserv and Finastra.

Another offering was Bakkt Crypto Payout, allowing employers to offer employees — and especially gig workers — part of their pay in crypto. He also pushed crypto rewards as “a terrific entry point for crypto adoption.”

Michael added that Bakkt’s expertise includes compliance assistance, noting its best-in-class New York Department of Financial Services (NYDFS) BitLicense, as well as deep experience in compliance and risk management.

Fidelity National Information Services (FIS)

Chairman and CEO Gary Norcross dove into the company’s crypto services in his opening presentation, pointing to a then-recent partnership with USD coin (USDC) stablecoin issuer Circle — enabling FIS “merchants to receive settlement in USD coin.”

That will make Fidelity National Information Services the “first provider of USDC crypto capabilities,” President Stephanie Ferris noted later on in the presentation, pointing to the deal with the No. 2 stablecoin — which is rapidly gaining market share — as an example of FIS expanding its own share of the crypto vertical.

Noting that the firm “processed for the top four out of five largest crypto exchanges,” Ferris said clients were attracted by the “level of authorizations and fraud rates that we can provide for them … and because we’re a large-scale provider for them.”

The major cryptocurrency exchange Crypto.com was FIS Worldpay’s pilot customer for USDC, Norcross said, adding that the service is an example of the company’s “ability to quickly deploy advanced technologies.”

Norcross also pointed to FIS Capital Markets’ new partnership with digital asset custodian Fireblocks “to enable our clients to store and issue digital assets as well as to gain access to decentralized finance,” or DeFi.

See more: Today in Crypto: FIS Partners With Fireblocks to Offer Crypto Investments

Calling FIS “the leading acquirer for crypto,” Norcross pointed to a win in Q1 when the crypto exchange Currency.com signed up as a customer “after witnessing our capabilities and client service for another crypto exchange” as well as what he called “our expansive global reach, which will help them expand their own business.

Fiserv

Fiserv works with crypto assets in a number of ways, but it wasn’t on display, by and large, during its April 27 earnings call. President and CEO Frank Bisignano only mentioned crypto twice.

First, it came up when talking about “softness in our bill payments business” as he pointed to sequential growth rates that “continue to improve as we create new use cases like bill pay for FinTechs, including crypto digital wallets” as well as long-term renewals with large clients, including U.S. Bank and Regions Bank.

In response to a question about Fiserv’s go-to-market strategy, Bisignano returned to crypto, pointing to it as one of the “digital sidecars” it can build for clients.

Among other things, Fiserv had just launched a new set of FinTech-focused solutions, AppMarket, that provides financial institutions of all sizes access to cryptocurrency financing, as well as gig economy banking, small and medium-sized business lending and other offerings aimed at attracting younger consumers.

Read here: Fiserv Launches AppMarket Open Finance, FI/FinTech Collaboration Tool

Global Payments

CEO Jeff Sloan dove into crypto during Global Payments’ May 2 earning call when discussing the expansion of its partnership with PayPal, announced late in Q4 2021, to include support of cryptocurrencies “for the first time, expanding our target addressable markets.”

Hard on the heels of that, Sloan announced a partnership with digital asset payments firm Bakkt. Global Exchange would work with Bakkt on “a range of use cases starting with enabling cryptocurrency redemption in customer loyalty programs offered by our bank card clients, expanding our banking-as-a-service (BaaS) offerings to include cryptocurrency, and ultimately leveraging issuing technologies for linking virtual debit, credit and prepaid solutions,” Sloan said.

Along with BaaS, this was to include linking to virtual, debit, credit and prepaid solutions, as well as “multinational merchant payments acceptance,” Bakkt said in a release.

Mastercard

Crypto came up quite a bit during Mastercard’s Q1 2022 earnings call on April 28.

CEO Michael Miebach noted in his opening statement that the firm was “leaning into payments innovation in areas like installments and cryptocurrencies,” before saying that Mastercard had a three-pronged approach to building principled “solutions to support the crypto economy” and that it was “making substantial progress” in those areas.

First, he said, is “helping consumers easily and safely purchase cryptocurrencies and NFTs … [and] enabling consumers to spend their crypto holdings on card and cashing out their crypto wallets via Mastercard Send.”

Second was providing identity, cyber and consulting services to companies and other market participants, including government work on central bank digital currencies (CBDCs). Third, Miebach said, was “preparing our core network to directly support digital currencies.”

Miebach then turned to crypto credit cards that let users spend their cryptocurrency holdings at any network merchant — who receive cash — noting that the New York-based Gemini exchange’s crypto rewards Mastercard had recently launched.

He also pointed to the Nexo crypto-backed Mastercard that launched in several European countries — an important step in crypto credit cards as it is not a debit card but a secured credit card that, Miebach said “uses consumers’ digital assets as collateral to back their credit line.”

Read more: Nexo, Mastercard, DiPocket Launch Card Backed by a Crypto Credit Line

Miebach mentioned several other crypto cards launched with several banks in Europe and with Abra, Invesco and Belo in Latin America.

Miebach next pointed to crypto services, noting that Argentina-based online marketplace MercadoLibre had signed on with MasterCard’s blockchain intelligence firm CipherTrace — purchased in September — to “bring security and trust to their digital wallet in Brazil.”

More broadly, he added that Mastercard is expanding its crypto and digital currencies consulting service with clients including the Wirex exchange. The company’s blockchain-based Digital Identity, which is a “key priority area.”

PayPal

If you were looking for the word “crypto,” you’d have been disappointed by PayPal CEO Dan Schulman’s April 27 earnings call, in which he called Q1 2022 “the strongest in our history,” with spot revenue up 31% and total payment volume up 13%.

Crypto wasn’t mentioned once. However, the PayPal digital wallet, in which crypto is one of the payments options, is at the core of its strategy, Schulman said over and over.

Promising to “double down” on it, Schulman said “that’s where the future of the industry is going. It’s the future of PayPal. It is the heart of what we are trying to do from an engagement perspective.”

Speaking of both PayPal and Venmo, he added “we are working hard to have our digital wallets at the center of our consumers’ daily financial lives,” adding that customers who use it “transact 25% more at checkout than users that are not using the app.”

Visa

Not much was said about crypto during Visa’s earnings call on April 27 — certainly it was less of a topic of discussion then it had been — with Chairman and CEO Al Kelly starting off by mentioning crypto basically as an area of “significant opportunity in consumer payments,” and that the company continues to focus and work with governments including Brazil’s to build CBDCs.

He only mentioned crypto once more, but it was kind of a doozy.

“Last quarter, I announced the launch of our specialized global crypto advisory practice,” Kelly said. “We have seen interest from hundreds of clients globally and have committed engagements with 30 already covering their digital currency strategy, product development and their go-to-market plans.”

 

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