Why Visa Stock Topped the Market on Thursday
Key Points
It's using a stablecoin called, yes, Stable Coin, to do so.
If this pilot program is successful, the company could see significant material benefits.
Visa (NYSE: V) is getting more deeply involved in one aspect of next-generation finance, and on Thursday, investors rewarded the company for the effort. They traded its stock up by more than 2%, which easily topped the 0.4% rise of the benchmark S&P 500 index.
Stable news
Visa announced it was teaming up with a peer to advance the usefulness of such products. It is collaborating with Brale, the developer of the very appropriately named Stable Coin, to explore stablecoin settlement using the cryptocurrency.
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Visa will effectively test Stable Coin's effectiveness as a settlement mechanism in a "proof of concept" run through the Canton Network (a privacy-focused blockchain designed to handle the needs of institutional finance users). If the proof of concept is successful, the payment card giant will likely add Stable Coin to its network of accepted settlement currencies. Should that occur, Visa would have a way to settle large transactions instantly and privately.
In a press release touting the pilot program, Visa quoted its head of crypto, Cuy Sheffield, as saying, "Stablecoin settlement has shown how blockchain infrastructure can improve the speed and efficiency of money movement."
Saving time and money
As a leading payment card brand, Visa constantly processes a massive volume of transactions, ranging in size and scale. If it can clear those transactions instantly on a blockchain rather than have them held up by slow, legacy banking processes, it can drastically reduce idle capital and put those funds to more productive use.
The company seems to have its finger firmly on the pulse of next-generation solutions, as evidenced by this news, plus media reports on Wednesday that it's apparently part of a major new stablecoin consortium. I think this bolsters the buy case for the already very successful and highly profitable Visa.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Visa. The Motley Fool has a disclosure policy.