Billionaire investor Chamath Palihapitiya says the old guard of the traditional payment system is likely to be dethroned by emerging blockchain and decentralized finance (DeFi) technologies.

In a new discussion on the All-In podcast, the CEO of venture capital firm Social Capital told YouTube channel’s 134,000 subscribers that he plans to bet against industry giants Visa and Mastercard in favor. pioneers of Web 3.0.

Palihapitiya said,

“My biggest business loser for 2022 is Visa and Mastercard and the traditional payment rails and the whole ecosystem around it.

I think this is the year you can put on what will probably be the most profitable spread trade of my life, which is running out of these companies and whoever is basically living on those two or three for hundred [transaction] Tax and long thought-out Web3 crypto projects that rebuild the payment infrastructure in a completely decentralized way …

If you read the white papers of these crypto projects and systematically put a framework in place, I think you can be long these and you can be short Visa / Mastercard because I think that is their maximum market cap. .

A spread transaction involves the simultaneous buying and selling of two linked securities as part of a single unit. Investors seek to profit from the price differences between each security, rather than the rise or fall in the value of a single security.

Palihapitiya cites online shopping giant Amazon’s decision to stop accepting Visa credit card transactions in the UK as a milestone.

The CEO says,

“The canary in the coal mine here is quite large.

The most important thing is that Amazon decided earlier in the year to shut down Visa in the UK.

Amazon isn’t going to do something like that in my opinion, unless it’s a test of what they can do all over the world.

Palihapitiya says he is looking to countries in the developing world to embrace emerging technologies over the next decade.

“There really is no need today for all these small businesses to sit on Visa, Mastercard and [American Express] rails. It is pointless.

It will probably develop in the developing world first, which is why I think focusing on markets like Nigeria is so much more exciting than talking about these declining Western European countries. This is where it’s going to happen …

We will look back in 10 years and [traditional payment processor] market capitalizations will be significantly lower.

Anyone in this traditional infrastructure and rails versus anyone in this new infrastructure and new rails, this will sound like a no-brainer. “

Palihapitiya concludes by discussing the “buy now, pay later” model of the credit card system.

“Buying now, paying later is a rate arbitrage…

It starts to accustom the consumer experience to, “I don’t need to pay these usurious rates to these three credit card companies to facilitate a transaction of money I already have or money I already have.” am good ”.

That’s the big idea, and when you translate that to Web3 in a good project or a good series of projects, you won’t need these companies.

I think this will gut trillions of dollars in market capitalization. “

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Featured Image: Shutterstock / thinkhubstudio / Andy Chipus