MASTERCARD PARTNERS WITH BAKKT

The credit card provider MasterCard wants to profit further from the crypto trend and is steadily expanding its involvement in the Bitcoin & Co. business. Now, the industry giant entered into a cooperation with the stock exchange newcomer Bakkt, which operates a platform for managing digital assets.

Bitcoin ETF supports current price rally

Bitcoin is currently on everyone’s lips again. After the US Securities and Exchange Commission (SEC) blocked a Bitcoin ETF for months, the US government institution surprisingly waved through a fund based on Bitcoin futures – the first of its kind in the US. Investors are now hoping for more financial products that track the crypto market. In the wake of the news, the price of the largest cryptocurrency by market capitalisation got an additional boost and, at times, marked a new record high of more than 67,000 US dollars.

MasterCard expands crypto commitment

The credit card provider MasterCard now seems to want to profit from this trend. The company has already significantly expanded its involvement in the crypto sector by acquiring the blockchain company CipherTrace and various partnerships with crypto players. But now MasterCard is stepping up its game. As the company recently announced at the fintech conference Money20/20, it will soon make it easier for merchants, financial institutions, banks and fintechs in the US to use various crypto services and also offer them themselves. 

To this end, MasterCard has teamed up with the payment service provider Bakkt, which operates an app in which the management of digital assets such as rewards, loyalty points, gift cards – and cryptocurrencies – is possible. Digital goods can be added to the smartphone application so that customers can use a clear representation of their portfolio, as the company explains on its website.

MasterCard customers can benefit from crypto services

Bakkt’s platform is now integrated into the MasterCard network, enabling the credit card provider to expand its range of services geared towards the digital assets space. For example, customers of the industry giant will soon be able to buy, sell and hold digital assets via custodial wallets powered by the Bakkt platform, MasterCard revealed in a press release. In addition, it also plans to integrate crypto services into existing customer loyalty solutions, allowing partners to offer cryptocurrencies as rewards.

Instead of loyalty points, consumers could collect cryptocurrencies when paying with debit or credit cards and redeem them for future purchases. This would also allow merchants and restaurants to pass on cryptocurrencies to their customers in the form of rewards using MasterCard’s tools, as Bakkt CEO Gavin Michael pointed out to “CNBC”.

Moreover, if customers already have existing loyalty points, they could be converted into Bitcoin & Co. at a set rate. “We’re lowering the barriers to entry by allowing people to take something like their reward points and trade them into crypto,” Michael said. “It’s an easy way to get started because you’re not using cash. You’re using something that’s an unused asset on your balance sheet.”

MasterCard operates one of the dominant payment networks worldwide, alongside competitor Visa. In total, about 2.8 billion of the payment provider’s credit cards are said to be in use. “MasterCard is committed to providing a broad range of payment solutions that deliver more choice, value and impact every day,” Sherri Haymond, executive vice president of digital collaborations at Master Card, said of the partnership with the crypto company. “Together with Bakkt, and based on our principled approach to innovation, we will enable our partners to not only offer a dynamic mix of digital asset options but also deliver differentiated and relevant customer experiences.” 

Bakkt is also enthusiastic about its collaboration with the industry giant. “We are incredibly excited to partner with Mastercard to offer crypto loyalty services to millions of consumers,” Nancy Gordon, executive vice president of loyalty programmes and payments at Bakkt, said in a press release. “As brands and merchants look to appeal to younger customers and consumers and their transaction preferences, these brand new offerings represent a unique opportunity to meet the growing demand for cryptocurrency, payment and rewards flexibility.”

As Bakkt found in a July 2021 study, not only is there a high demand for cryptocurrencies as an investment, but consumers also want to use digital currencies for everyday purchases. Forty-eight per cent of the 2,000 US consumers surveyed in the online survey said they had purchased cryptocurrencies in the first half of 2021. 

At the same time, 32 per cent of the respondents who have not yet added Bitcoin & Co. to their securities accounts declared an interest in doing so before the end of the year. This coincides with research results from MasterCard: the New Payments Index published in May revealed that 77 per cent of Millennials are interested in learning more about cryptocurrencies. Seventy-five per cent of the more than 15,000 participants from 18 countries also said they would use cryptocurrencies but lack expertise.

As Haymond told CNBC, the high level of customer interest in the crypto market contributed to the decision to partner with Bakkt. Not only could it make its offering attractive to new customers, but it could also keep existing customers from migrating to crypto exchanges.

MasterCard cooperation drives Bakkt share price up

The news around the cooperation with MasterCard was announced only a few days after the app developer’s stock market debut. For example, Bakkt shares have only been trading on the NYSE since 18 October 2021, after the company merged with acquisition target Intercontinental Exchange. While the stock closed slightly below the issue price of 10 US dollars on the first day of trading under the ticker “BKKT”, the announcement by MasterCard helped the newcomer to the stock exchange jump up to 31.57 US dollars a few days later. 

However, the announcement of a joint venture with Fiserv, the developer of banking software, on the same day is also likely to have given the share price positive impetus. Within the strategic partnership framework, the two companies want to combine their technologies to make the use of crypto assets suitable for the masses.

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