What happened?

Payments company Stripe acquired the stablecoin platform Bridge in a deal worth $1.1 billion, according to TechCrunch founder Michael Arrington. This acquisition is reportedly the largest in the crypto industry to date.
source

Okay, that sounds like an interesting piece of news, but why does it matter?

So payments company buys start-up crypto company?

• What did they buy and why?
• What impact will it have on their company?
• What impact will this acquiition have on Stripe?
• What does Bridge own, that is worth a billion dollars?

So I am asking myself these questions above, and I thought maybe someone else has the same questions?

Lets explore this or unpack it...

Who is Stripe?

• Stripe is a payment processing company, whose focus is apparently helping businesses accept credit and debit card transactions online.
• Okay, that is important, basic retail backbone of point of sale purchases, the biggest retail niche in the world.

But is Stripe Big??

The company recently announced that it surpassed $1 trillion in total payment volume for 2023.
source

Okay, that is big.

Who is Bridge?

Bridge was designed to compete with established payment networks like SWIFT and traditional credit card systems.
source

The platform enables businesses to create, store, send, and receive stablecoins, positioning it as a viable alternative for companies looking to tap into the benefits of digital currencies.
source

Okay more useful innovation.

So what happens when a Giant in retail business credit card payments... to the tune of 1 trillion dollars in annual volume...
... buys an innovative start-up that specializes in making stablecoins easy for businesses to access the benefits of digital currencies?
. It sounds like you get this huge innovation in the payments settlements space...

What is the impact on Stripe? What does bridge own, which is worth a Billion Dollars? Settlement.

Here I go again talking about settlement... again.

• Settlement is one if the most important things which stablecoins bring to the table of payment systems.
• Most payments involving US Dollars are messages which contain promises, promises to pay, at a later date.
• The message is a promise to pay which is called a debt, the message is a debt, the debt is the message.
• The payment date is 30 days plus!
• Thats right, settlement on a typical credit card debt starts in 30 days.
• Way back in the beginning of time we bought stuff with cash and settlement was immediate or instant. Now the majority of retail purchases are with credit cards, and settlement is 30 days plus.
• Thats a longtime to wait for your money.
• But then came the first cryptocurrency called Bitcoin.
• Bitcoin re-introduced the world to same day settlement, which didn't exist in the credit card world.
• Now other cryptocurrency tokens like Dash and now stablecoins have introduced the world to immediate settlement.
• What is so big about settlement, settlement means the money you are owed, leaves the bank account or wallet of someone who owes you money, and is deposited into your bank account. And this occurs today, not in 30 days, not in 60 days, not in 90 days, it occurs today.

Okay, so is this 30 days a big deal?
yes

Time is Money...

• When a big credit card company owes you money, they settle in 30 days, and for the entire 30 days, the money they owe you, sits in their bank account earning interest. This interest could be paid to you, but it isn't because settlement takes so long.
• BUT... if settlement was immediate or instant, that money would be in your bank account earning interest.
• Now bank interest rates are small, 0.5%, 1%, 2%, etc is that a lot of money?

Well 1% of a hundred dollars is a dollar.
But 1 percent of a million dollars is actually 10,000 dollars.
And 1 percent of a billion dollars is actually ten million dollars.
While 1 percent of one trillion dollars is actually 10 billion dollars.

• So that small percentage interest rate, being paid on a large amount of money, means large amounts of money, going to you and not them.
• All this is brought about by better settlement.
• And stablecoins bring better settlement
• But that's not all that's at play here, there is also the issue of ChargeBacks.

First, remember that credit card payments are literal Promises to Pay, which settle in 30 plus days.

• That's a long time to wait to get paid, but if you made settlement immediate, you get the 30 days worth of interest rate paid on the deposited money.

• And when your talking about Trillions of dollars in volume, even fractions of a percent translate into billions of dollars of income.

• This is where the math gets crazy.

• A billion is a 1000 times a million, and a trillion is a 1000 times a billion, so basically a million times a million.

• So 30 days is one month, or 1 month out of 12, which means you can earn 1/12th of the yearly interest payment of 6% interest per year/annum or 0.5% pinterest in 30 days on one trillion dollars equals billions of dollars.

• How? If you could take that 30 days of settlement, on one trillion dollars, and reduce it to immediate settlement and get 1/12th of a Blackwater BUILD Treasury bond at 6% per annum or 0.5% for that 30 days the stablecoin settlement saved you, you earn 30 days of interest, and thats close to 6 billion a year.

• When the numbers get this big, the fractions of a percent turn into a huge deal.

• This is why settlement is very important.

• The money owed you, gets into your banking account, 30 days sooner, and earns you 30 days of iinterest.

• Read more to see how this translates into millions or even billions of dollars.

Second, credit cards have built in take backsies, called CHARGEBACKS...

• as in you buy something with your credit card, claim fraud and someone , somewhere gets to keep the merchandise and the card holder gets refunded the price of the merchandise. It's called consumer protection against frud, but in the credit industry it's clled a Chargeback and it's a pure loss, loss of merchandise and loss of money used to purchase it. A lose lose situation.
• I call it Built in takebacksies on credit cards, which cost businesses billions of dollars...

Do you think I am exaggerating? Look at the credit card industries own numbers...

According to available data, the credit card chargeback issue is considered significant for retail businesses, with an average chargeback rate of around 0.52%, meaning that roughly 6 out of every 1,000 transactions results in a chargeback; this can be attributed to factors like delivery issues, product quality disputes, and "friendly fraud" where customers falsely claim unauthorized charges

How much money is this per year?

• 0.6% of 1 trillion dollars of sales volume equals 6 billion dollars lost to Chargebacks in one year for Stripes customers alone.
• Add to this fact that Stripe customers represent almost 20% of the retail Market, so total annual losses to retail business from charge backs is in the neighborhood of 5 times 6 billion or 30 billion dollars per year.
• So now 1.1 billion dollars is starting to look like a bargain, if it can fix this chargeback issue.
• So how would that work??
• Credit cards have Take backsies, but cryptocurrency transactions don't..
• Do you think their could be interest in elmination chargebacks by getting people to pay their debts with stablecoins, not credit cards?

Yes, hell yes.

Last words for now...

Now that we have considered to 30 billion in chargebacks and 30 billion in lost interest from delayed settlement, the cost of Bridge sounds like a bargain..

• Compared to 30-60 billion, a 1.1 billion one time price is looking like a bargain, if it can recover eve a fraction of that 6 billion a year, say half or a third of that would still be billions of dollars per year, recouping the purchase price in 1-3 years and I suspect the credit card industry would find that achievement to be outstanding.

• This reduction in losses may have other impacts like possibly increased market share for the Stripe Company?
• I mean who would want to do business with a credit card processor who figures out how to reduce a 6 billion dollar loss a year and also earn you interest payments on your money, which is sittting in someone el;ses' account earning interest, when it could be sitting in your account earning interest?

And this is only two aspects of what this could do for them.

• I am sure these bright people running stripe have more information and creativity then I do, when it comes to application of this technology to their business model.
• I am sure I am just scratching the surface of the most obvious benefits.

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