trending Market Intelligence /marketintelligence/en/news-insights/trending/y8Bp8DatXarljQYu1N2F9Q2 content esgSubNav
In This List

The week in fintech: Cryptocurrency disruption to payments 'not likely' in '18

Blog

Europe: 5 key OTT trends to watch in 2022

Podcast

Next in Tech | Episode 50: InfoSec spending up, again…

Blog

Broadcast deal market recap 2021

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud


The week in fintech: Cryptocurrency disruption to payments 'not likely' in '18

This weekly recap features updates on bank technology, payments, online lending and other news in the financial technology space. Send tips, ideas and chatter to rachel.stone@spglobal.com. For other recent fintech news, click here.

Widespread adoption of the bitcoin network to make payments is "not likely" in 2018, according to an industry analyst, but may happen down the line.

Media attention and Wall Street's growing acceptance of bitcoin has pushed the digital currency into the spotlight. The vast majority of transactions on the bitcoin network today are speculative, but more and more companies, like Overstock.com Inc., are starting to accept cryptocurrencies as payment. Bernstein analyst Lisa Ellis called the digital currency a "wild" and "really interesting" alternative system.

"[We] are very, very worried over the long term about the potential risk," she said in an interview. "But so far, it's not looming yet."

The analyst said cryptocurrencies pose no immediate monetary threat to payment giants Visa Inc. and Mastercard Inc. Transacting in cryptocurrencies is not any better than using a debit or credit card, she said, adding that the bitcoin system is neither faster nor more secure.

Bitcoin processes only 7 transactions per second, while Visa and Mastercard can process 56,000 transactions per second, Ellis said. A bitcoin transaction takes several hours to settle and clear, but Visa and Mastercard authorize transactions in 20 milliseconds anywhere around the world.

Over the last year, Ellis said the space has narrowed to focus on bitcoin as a store of value and an alternative to gold, which does not relate to the payments space. That makes bitcoin analogous to a commodity, she said.

For at least the next six months, Ellis expects the focus to be on bitcoin futures and "establishing custodianship" for the cryptocurrency. Cboe Global Markets Inc. successfully launched bitcoin futures trading this week, and fellow Chicago-based exchange CME Group Inc. launches its bitcoin futures trading Dec. 18.

Where cryptocurrency as a store of value and as a payment mechanism starts to blur is in truly developing markets such as Africa, where there may not be stable fiat currencies, Ellis said. Until people on a large scale are willing to transact in cryptocurrency rather than in the government-backed fiat currency, the payment behemoths will not face significant competition, she said.

The price of bitcoin reached fresh all-time highs this week and sat at $17,651.94 at 4:15 p.m. ET on Dec. 15.

Also in payments, Verifone Systems Inc. reported fourth-quarter earnings that Credit Suisse analyst Paul Condra said beat expectations, although management's 2018 outlook was "significantly lower" than his expectations. In a Dec. 12 note, the analyst said guidance was muddled by multiple divestitures in Petro Media, its China unit and its taxi business.

In digital lending this week, Affirm Inc. raised $200 million in new equity. Singapore's sovereign wealth fund GIC led the funding round, bringing the company's total equity funding to $450 million. Among others, existing investors in the San Francisco-based startup include Khosla Ventures LLC and Spark Capital Partners LLC. Affirm will use the proceeds to increase credit distribution capacity, introduce new products and services and expand its merchant partners, which currently total around 1,200.

In banking technology news this week, some banks are turning to isolate browsing, or remote browsing, technology amid the constant threat of malicious cyberattacks, American Banker reported. JPMorgan Chase & Co., American Express Co. and HSBC Holdings Plc announced Dec. 11 that they are leading a $40 million round of funding in Menlo Security Inc., an isolation-tech provider.

From Dec. 8 to Dec. 14, the SNL U.S. Financial Technology Index fell 0.08%.

A recent report from S&P Global Market Intelligence explores how banks and insurers are embracing fintech innovation. The report looks at recent trends and provides outlooks for the insurtech, digital lending, digital investment management, digital banking, payments and distributed ledger technology sectors. Click here to read the report.