Mastercard’s Chainlink Deal Opens New Revenue Stream for Card Issuers — But Raises Risk Flags

Mastercard and decentralized oracle network Chainlink have announced a collaboration that allows cardholders to use any Mastercard card to purchase cryptocurrencies directly from a decentralized exchange, or DEX. 

The move stands to increase card transaction volume and open new paths to revenue for credit card issuers, but a relatively new market such as the cryptocurrency space may expose issuers to risks.

Mastercard and Chainlink’s partnership is historic because it represents the first time “a major payments network has enabled direct-to-DEX swaps at scale,” according to a press release announcing the union. 

In the past, users who wanted to purchase crypto on a blockchain network may have encountered interface limitations and challenges. But Mastercard’s arrangement with Chainlink, which enables users to buy crypto directly on Uniswap, aims to remove many of the barriers those wishing to purchase crypto may have faced.

“This is what crypto looks like when it’s ready for the real world,” Raj Dhamodharan, Executive Vice President, Blockchain & Digital Assets at Mastercard, said in the company’s release. “In coming together with Chainlink, we’re at the start of a very exciting journey to truly revolutionize the way we use cards for on-chain finance.”

But cryptocurrency supporters aren’t the only stakeholders who may be pleased by Mastercard’s partnership with Chainlink.

Dhamodharan said that Mastercard and its partners are “enabling billions of people to participate in the crypto economy with the cards in their wallets today.”

Those words should be music to the ears of credit card issuers.

They stand to reap the benefits of more transactions without having to significantly adjust their card programs or incur substantial expenses to accommodate their cardholders’ crypto purchases.

Cryptocurrency is still a relatively new asset. The world’s leading cryptocurrency, Bitcoin, turned 16 earlier this year. For comparison, traditional currencies such as the U.S. dollar are hundreds of years old. 

It can take companies time to formulate strategies when working with a new currency. They may need to observe the experiences of competitors and note any issues that arise when their customers interact with new monies.

Barclays Bank, issuer of the Barclaycard, recently announced that it will not allow its customers to use the Barclaycard for crypto transactions beginning on June 27. 

On June 27, Barclays Bank began to block crypto purchases a customer attempts to make with the Barclaycard.

“We’re doing this because a fall in the price of crypto assets could lead to customers finding themselves in debt they can’t afford to repay,” the bank said in a post on its website.

The announcement from Barclays, which is one of the largest banks in the world, highlights concerns that credit card issuers should take into consideration for their card programs. 

An issuer that allows cardholders to make crypto purchases with its cards could see revenue gains. But those gains could be offset by losses, including reputational harm, if customers go into debt or experience complications when purchasing cryptocurrencies with a credit card.