Sam Dickie: Fisher Funds expert on on the rise of stablecoins

Mastercard and a small handful of other companies have dominated the way money moves between banks, shops and consumers, but that could soon change.

Stablecoins have been touted as a possible disrupter - but what does that mean for people?

Fisher Funds expert Sam Dickie explains further.

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Episode Transcript

Speaker 1 (00:00):
It's talk about master Card. Master Card has got a

(00:01):
bit of a disruptor coming at it stable coins. They've
been talented as a big way or rather away around
the big credit card companies. And Sam Dicky from Fisher
Funds is with us.

Speaker 2 (00:09):
Elo Sam good evening here.

Speaker 1 (00:11):
Okay, talk to me about MasterCard. Why are they so profitable?

Speaker 2 (00:15):
Well, they're the ultimate them and Visa at the ultimate
toll road. So they operate a sort of an invisible
series of pipes or highways that connect three and a
half billion credit cards to one hundred and fifty million
shops or merchants across more than two hundred and ten countries.
So they don't lend money or take credit risk. They

(00:36):
simply charge a toll ll fee every time money moves
across their invisible pipes. And they've got a super wide
moat because switching costs are brutal, so banks can't switch
payment networks without rebuilding entire infrastructures and reissuing millions of
credit cards. Plus, master Card has that ultimate sort of
self reinforcing network effect mote, so every time a new

(00:58):
shop down the road from you here, there is added
to that network. Makes a network more valuable to you
as a card holder, and every time you know, I'm
added as a new cardholder, that makes it more valuable
to that shop down the road. So it's been said
historically it's easier to move a mountain than to displace
a payment network.

Speaker 1 (01:15):
Interesting, So then what what are stable coins and how
do they threaten this?

Speaker 2 (01:19):
Yeah, so they're digitally they're like digital dollars on steroids.
So they are cryptocurrencies peaked one to one to a
major currency like the USD So issuers are usually non
government organizations, and the biggest in the world is Tether
for example. So the Tether stable coin basically digital cash
that moves at Internet speed without needing banks or card networks.

(01:41):
So this threat that you're talking about read its head
because two things happened very recently in the last week
or so. The first one is Amazon and Walmart, So
the two biggest retailers in the world are allegedly looking
at issuing their own stable coins like Tether, so that
got the market hopping. And the second one was the
Genius Act. Great name for an act is halfway through

(02:04):
the legislature late of process in the US, So that
act creates the first federal framework for regulating stable coins,
and if you think about it as a user or consumer,
that would give you more confidence to use stable coins.
And while master Card charges merchants a few percent per transaction,
so say you know, I buy one hundred dollars pair

(02:24):
of sunglasses from a merchant, they would charge that merchant
three dollars, So the merchant we don't only get sort
of ninety seven dollars. Stable coins can process payments for
less than point one of a percent, So on the
face of it, the barbarians are at the gate. But
I would just say not so fast, because merchants may
want to not pay this two or three dollars and

(02:46):
bypass the credit card networks. But the lack of incentive
for you and I to widely use stable coins might
slow things down. So there's no rewards program for us
unlike the credit cards, and stable coins can't pay interest
on cash out unlike savings outs. And even in a
worst case scenario, this would only impact ten to twenty
percent of Mastercard's business. Because stable coins are like a

(03:07):
debit card, you need the funds in the account that
they have no credit card capability.

Speaker 1 (03:12):
Okay, so what does this mean? For investors, do you think.

Speaker 2 (03:16):
I just think it's a stark reminder that even companies
with the widest modes, so that those brutal switching costs
and that selfwa reinforcing network effect are going to be
tested in the future given the pace technology and of
course AI is moving that. So investors just need to
be more bit vigilant than ever and a little more
nimble perhaps may have been in the past.

Speaker 1 (03:39):
Sam, It's good to talk to you. Thank you are
really appreciated that. Sam Dickey. Fascinating stuff. Officier Funds. For
more from Heather Duplessy Allen Drive. Listen live to news talks.

Speaker 2 (03:48):
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