1 00:00:00,000 --> 00:00:01,880 Speaker 1: It's talk about master Card. Master Card has got a 2 00:00:01,920 --> 00:00:04,600 Speaker 1: bit of a disruptor coming at it stable coins. They've 3 00:00:04,640 --> 00:00:06,960 Speaker 1: been talented as a big way or rather away around 4 00:00:07,000 --> 00:00:09,160 Speaker 1: the big credit card companies. And Sam Dicky from Fisher 5 00:00:09,160 --> 00:00:09,920 Speaker 1: Funds is with us. 6 00:00:09,800 --> 00:00:11,639 Speaker 2: Elo Sam good evening here. 7 00:00:11,760 --> 00:00:14,600 Speaker 1: Okay, talk to me about MasterCard. Why are they so profitable? 8 00:00:15,680 --> 00:00:18,880 Speaker 2: Well, they're the ultimate them and Visa at the ultimate 9 00:00:18,920 --> 00:00:23,240 Speaker 2: toll road. So they operate a sort of an invisible 10 00:00:24,280 --> 00:00:28,120 Speaker 2: series of pipes or highways that connect three and a 11 00:00:28,160 --> 00:00:30,240 Speaker 2: half billion credit cards to one hundred and fifty million 12 00:00:30,280 --> 00:00:32,760 Speaker 2: shops or merchants across more than two hundred and ten countries. 13 00:00:32,800 --> 00:00:35,920 Speaker 2: So they don't lend money or take credit risk. They 14 00:00:36,000 --> 00:00:39,360 Speaker 2: simply charge a toll ll fee every time money moves 15 00:00:39,360 --> 00:00:42,560 Speaker 2: across their invisible pipes. And they've got a super wide 16 00:00:42,600 --> 00:00:46,520 Speaker 2: moat because switching costs are brutal, so banks can't switch 17 00:00:46,560 --> 00:00:51,199 Speaker 2: payment networks without rebuilding entire infrastructures and reissuing millions of 18 00:00:51,200 --> 00:00:54,560 Speaker 2: credit cards. Plus, master Card has that ultimate sort of 19 00:00:54,600 --> 00:00:58,480 Speaker 2: self reinforcing network effect mote, so every time a new 20 00:00:58,520 --> 00:01:00,360 Speaker 2: shop down the road from you here, there is added 21 00:01:00,640 --> 00:01:02,800 Speaker 2: to that network. Makes a network more valuable to you 22 00:01:02,880 --> 00:01:05,360 Speaker 2: as a card holder, and every time you know, I'm 23 00:01:05,360 --> 00:01:07,400 Speaker 2: added as a new cardholder, that makes it more valuable 24 00:01:07,400 --> 00:01:09,800 Speaker 2: to that shop down the road. So it's been said 25 00:01:09,920 --> 00:01:13,560 Speaker 2: historically it's easier to move a mountain than to displace 26 00:01:13,600 --> 00:01:14,720 Speaker 2: a payment network. 27 00:01:15,080 --> 00:01:17,880 Speaker 1: Interesting, So then what what are stable coins and how 28 00:01:17,880 --> 00:01:18,679 Speaker 1: do they threaten this? 29 00:01:19,680 --> 00:01:22,920 Speaker 2: Yeah, so they're digitally they're like digital dollars on steroids. 30 00:01:22,920 --> 00:01:25,399 Speaker 2: So they are cryptocurrencies peaked one to one to a 31 00:01:25,440 --> 00:01:29,479 Speaker 2: major currency like the USD So issuers are usually non 32 00:01:29,520 --> 00:01:32,000 Speaker 2: government organizations, and the biggest in the world is Tether 33 00:01:32,520 --> 00:01:36,600 Speaker 2: for example. So the Tether stable coin basically digital cash 34 00:01:36,640 --> 00:01:41,000 Speaker 2: that moves at Internet speed without needing banks or card networks. 35 00:01:41,040 --> 00:01:45,920 Speaker 2: So this threat that you're talking about read its head 36 00:01:46,040 --> 00:01:48,520 Speaker 2: because two things happened very recently in the last week 37 00:01:48,600 --> 00:01:51,120 Speaker 2: or so. The first one is Amazon and Walmart, So 38 00:01:51,440 --> 00:01:55,160 Speaker 2: the two biggest retailers in the world are allegedly looking 39 00:01:55,200 --> 00:01:58,080 Speaker 2: at issuing their own stable coins like Tether, so that 40 00:01:58,240 --> 00:01:59,920 Speaker 2: got the market hopping. And the second one was the 41 00:02:00,080 --> 00:02:04,080 Speaker 2: Genius Act. Great name for an act is halfway through 42 00:02:04,120 --> 00:02:07,040 Speaker 2: the legislature late of process in the US, So that 43 00:02:07,160 --> 00:02:11,120 Speaker 2: act creates the first federal framework for regulating stable coins, 44 00:02:11,120 --> 00:02:13,360 Speaker 2: and if you think about it as a user or consumer, 45 00:02:13,440 --> 00:02:16,560 Speaker 2: that would give you more confidence to use stable coins. 46 00:02:16,760 --> 00:02:21,200 Speaker 2: And while master Card charges merchants a few percent per transaction, 47 00:02:21,360 --> 00:02:24,640 Speaker 2: so say you know, I buy one hundred dollars pair 48 00:02:24,680 --> 00:02:27,840 Speaker 2: of sunglasses from a merchant, they would charge that merchant 49 00:02:28,320 --> 00:02:29,960 Speaker 2: three dollars, So the merchant we don't only get sort 50 00:02:29,960 --> 00:02:33,560 Speaker 2: of ninety seven dollars. Stable coins can process payments for 51 00:02:33,639 --> 00:02:35,440 Speaker 2: less than point one of a percent, So on the 52 00:02:35,480 --> 00:02:38,640 Speaker 2: face of it, the barbarians are at the gate. But 53 00:02:38,880 --> 00:02:42,040 Speaker 2: I would just say not so fast, because merchants may 54 00:02:42,120 --> 00:02:46,120 Speaker 2: want to not pay this two or three dollars and 55 00:02:46,160 --> 00:02:48,440 Speaker 2: bypass the credit card networks. But the lack of incentive 56 00:02:48,480 --> 00:02:51,799 Speaker 2: for you and I to widely use stable coins might 57 00:02:51,800 --> 00:02:54,280 Speaker 2: slow things down. So there's no rewards program for us 58 00:02:55,040 --> 00:02:58,320 Speaker 2: unlike the credit cards, and stable coins can't pay interest 59 00:02:58,360 --> 00:03:00,960 Speaker 2: on cash out unlike savings outs. And even in a 60 00:03:01,040 --> 00:03:04,320 Speaker 2: worst case scenario, this would only impact ten to twenty 61 00:03:04,320 --> 00:03:07,640 Speaker 2: percent of Mastercard's business. Because stable coins are like a 62 00:03:07,639 --> 00:03:09,960 Speaker 2: debit card, you need the funds in the account that 63 00:03:10,160 --> 00:03:11,799 Speaker 2: they have no credit card capability. 64 00:03:12,240 --> 00:03:15,280 Speaker 1: Okay, so what does this mean? For investors, do you think. 65 00:03:16,520 --> 00:03:19,440 Speaker 2: I just think it's a stark reminder that even companies 66 00:03:19,440 --> 00:03:23,120 Speaker 2: with the widest modes, so that those brutal switching costs 67 00:03:23,280 --> 00:03:27,520 Speaker 2: and that selfwa reinforcing network effect are going to be 68 00:03:27,680 --> 00:03:30,800 Speaker 2: tested in the future given the pace technology and of 69 00:03:30,840 --> 00:03:33,959 Speaker 2: course AI is moving that. So investors just need to 70 00:03:34,000 --> 00:03:36,200 Speaker 2: be more bit vigilant than ever and a little more 71 00:03:36,280 --> 00:03:38,120 Speaker 2: nimble perhaps may have been in the past. 72 00:03:39,240 --> 00:03:40,680 Speaker 1: Sam, It's good to talk to you. Thank you are 73 00:03:40,720 --> 00:03:44,840 Speaker 1: really appreciated that. Sam Dickey. Fascinating stuff. Officier Funds. For 74 00:03:44,960 --> 00:03:48,560 Speaker 1: more from Heather Duplessy Allen Drive. Listen live to news talks. 75 00:03:48,600 --> 00:03:51,800 Speaker 2: It'd be from four pm weekdays, or follow the podcast 76 00:03:51,880 --> 00:03:52,880 Speaker 2: on iHeartRadio.