The following is an article written by Rise Analytics' VP, strategic Consulting, Dan Price, and Director, Strategic Consulting Payments and Collections, Aris Jerahian. It originally appeared on CUInsight.com.
The financial services landscape is shifting beneath our feet, and the latest shakeup comes from an unexpected source: your local big-box retailer. As PayPal's PYUSD gains momentum and Walmart explores blockchain payment options, we're witnessing the early stages of what could be a major reorganization of how Americans spend money.
Retailer-issued stablecoins—digital currencies pegged to the U.S. dollar and controlled by merchants—are no longer just a tech curiosity; they pose a direct challenge to the $90 billion interchange fee system that has long subsidized credit union operations and member rewards programs.
However, what the headlines overlook is that consumer behavior change is never linear, and credit unions have successfully navigated payment disruptions before. The question isn't whether to panic—it's whether to prepare strategically.
The Economics Are Too Compelling to Ignore
Walk into any Walmart and observe the payment mix: roughly 35% debit, 25% credit, and a growing percentage of mobile payments. Each swipe generates interchange fees averaging 1.8% for credit and 0.6% for debit transactions. For Walmart's $611 billion in annual revenue, that translates to approximately $8 to $10 billion in annual payment processing costs.
This isn't theoretical anymore. Major retailers are already experimenting with payment alternatives that bypass traditional networks. Amazon's partnership with Venmo, Target's collaboration with Sezzle, and Starbucks' stored value program all aim to reduce reliance on Visa and Mastercard's duopoly.
A retailer-issued stablecoin takes this logic to its natural conclusion. Instead of paying interchange fees to banks and networks, merchants can capture that value directly while gaining unprecedented control over transaction data and customer relationships.
The Consumer Adoption Reality Check
Despite the compelling economics for retailers, consumer adoption faces genuine headwinds that crypto enthusiasts often overlook. In my conversations with credit union members across different demographics, three barriers consistently emerge.
First, the trust deficit is real and generational. While younger consumers readily adopt new payment technologies, they still expect the safety net of traditional banking protections. Stablecoins operating outside FDIC insurance create psychological friction that will be difficult to overcome.
Second, the network effect problem is more nuanced than early analyses suggest. Used only to transact with the primary merchant, stablecoins become a multi-step process that’s arguably more cumbersome than just using ACH, debit or credit.
Third, the embedded finance trend is accelerating consumer comfort with non-bank payment solutions. Buy-now-pay-later adoption jumped from 2% to 15% of e-commerce transactions in just three years. Consumer payment preferences evolve faster than traditional banking intuition suggests.
Disruption isn’t Easy. When the Stars Align, it Happens
When Uber launched, there was a real and generational trust deficit. I can still remember my mom saying, “Am I really going to let a stranger drive me home? At least the taxi drivers have background checks.”
How did they shift perception? By being more convenient and faster than the competition and leaving more money in the consumer’s pocket.
A Walmart-only stablecoin has limited utility compared to a Visa card. But consider the potential for retailer coalitions. If Target, Home Depot, and Costco jointly accept each other's stablecoins, suddenly you have a meaningful closed-loop ecosystem covering a significant portion of household spending.
Being faster will be difficult, but blockchain efficiency is improving. While Ethereum was once clogged with $100 gas fees, newer blockchains and Layer 2 solutions—like SEI, SUI and Arbitrum—offer transactions for under a penny with near-instant finality.
There are ample opportunities to buy a consumer’s trust and loyalty by padding their wallets. Merchants could redirect the considerable interchange fee savings (alongside their sizable growth war chests) into consumer rewards, increasing spending rewards. They could invest the FIAT used to buy their stablecoin, forwarding (airdropping their coin, in crypto terms) the APR to stablecoin holders.
The Credit Union Impact: Beyond Interchange Revenue
The conversation around retailer stablecoins often focuses narrowly on interchange fee erosion, but the implications run deeper. Consider three scenarios that should concern credit union leadership.
Data disintermediation poses the more subtle but potentially more damaging threat. When members transact within retailer ecosystems, credit unions lose the behavioral insights that drive cross-selling opportunities. That Home Depot purchase that might have triggered a home equity loan offer never appears in your transaction analysis.
Member relationship depth erodes gradually, then suddenly. Today's engaged member who uses your debit card for 70% of transactions becomes tomorrow's distant relationship maintained primarily through direct deposit and occasional loan products. This mirrors what happened with traditional investment services as members moved assets to robo-advisors.
Competitive positioning requires rethinking core value propositions. If retailers can offer instant payments, integrated rewards and seamless checkout experiences, what unique value does the credit union payment experience provide?
Strategic Response: Play on Your Strengths
Rather than attempting to out-innovate technology giants, credit unions should focus on amplifying their inherent advantages. The path forward requires strategic thinking, not reactive scrambling.
Deepen data sophistication beyond basic transaction monitoring. Advanced analytics can identify members at risk of payment relationship migration before it happens. Credit unions with robust data programs report 15%-20% higher member engagement scores and demonstrably better loan portfolio performance.
Accelerate partnership strategies that combine credit union trust with merchant convenience. Instead of viewing retailers as threats, identify opportunities for collaboration. Some progressive credit unions are already piloting co-branded experiences that offer member discounts while preserving the credit union relationship.
Reframe the value proposition around financial wellness rather than payment efficiency. Stablecoins excel at transactions but fall short of financial guidance, debt management and long-term wealth building. These remain areas where credit unions' member-centric culture creates sustainable competitive advantages.
The most successful credit unions will use this disruption as an opportunity to clarify their unique value rather than chase every technological trend.
The Long View
Retailer stablecoins won't replace credit unions, but they will accelerate the ongoing transformation of financial services from account-centric to relationship-centric competition. This shift favors institutions that genuinely prioritize member relationships over transaction volume.
The credit unions that thrive in this environment will be those that view payment innovation as one component of comprehensive member financial success, not an end in itself. They'll use data to anticipate member needs, partnerships to extend convenience, and trust to differentiate from purely transactional relationships.
This isn't about fighting the future—it's about defining your role in it.
This blog was co-written by Dan Price.
