Payments Stocks in the Stablecoin Era: 3 to Buy and 1 to Avoid

Stablecoins, which have risen in popularity in recent years, are pegged to the U.S. dollar and can be transferred cheaply and instantly over blockchain rails rather than traditional payment networks. That makes them a potential threat to payment companies like Visa (NYSE: V), Mastercard (NYSE: MA), American Express (NYSE: AXP), and PayPal (NASDAQ: PYPL).

However, stablecoins probably won't impact Visa, Mastercard, and American Express as much as PayPal. Let's see why those three credit card stocks are still worth buying in the stablecoin era, and why it might be smarter to avoid PayPal's stock.

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Why stablecoins can't derail the credit card leaders

Visa and Mastercard don't issue their own cards. Banks and other financial institutions issue those co-branded cards and handle the actual accounts. At the same time, Visa and Mastercard generate most of their revenue by charging merchants 1%-3% "swipe fees" for processing those cards.

On the surface, stablecoins appear to be a major threat to Visa and Mastercard, as merchant groups have repeatedly demanded lower swipe fees. But in reality, most businesses will still accept Visa and Mastercard ubiquitous cards rather than dropping them and alienating a large portion of their customer base. Most businesses and consumers also probably won't want to manage crypto wallets or private keys just to save a few dollars.

Visa and Mastercard also provide strong consumer protection, fraud prevention, and dispute resolution services that stablecoins don't offer on their own. Instead of directly competing with stablecoins, Visa and Mastercard have been testing stablecoins to settle payments within their own networks and integrating them into their cards and digital wallets. In other words, they're bringing stablecoins under their own umbrellas to upgrade their own payment networks.

American Express differs from Visa and Mastercard because it operates its own bank and issues its own cards. Since it needs to back its own cards with its own balance sheet, it primarily targets affluent customers with high credit scores. To sweeten the pot, it generally offers more attractive loyalty programs and travel services than Visa and Mastercard -- which makes it more of a "luxury" financial platform than a commoditized payment rail. Nevertheless, American Express has also been exploring the usage of stablecoins for its own money transfers.

Therefore, the idea that leading stablecoins like Tether or USD Coin can replace conventional credit cards is naive. Instead, the major threats these credit card companies face will be antitrust regulation, which could reduce their swipe fees, and broader macro headwinds to consumer spending. As long as they can overcome these challenges -- as they did in the past -- they should remain rock-solid investments.

Why stablecoins are a big headache for PayPal

PayPal is one of the world's largest digital payment platforms, but its number of year-end active accounts only grew from 426 million in 2021 to 439 million in 2025. Its growth slowed down as it faced intense competition from similar digital payment platforms.

PayPal facilitates easy digital payments from a user's checking account or linked cards, and it generates most of its revenue by taking a cut of each transaction that flows through its network. However, stablecoins undermine that business model with instant transfers and lower fees, and PayPal can't lock in its users as easily as Visa, Mastercard, and American Express.

PayPal launched its own stablecoin, PayPal USD (CRYPTO: PYUSD), in 2023 to address that growing threat. By integrating PayPal USD into its own platform, it aimed to streamline and accelerate its own payments in the same way as the credit card leaders.

Yet it's also an admission that stablecoins could further reduce the barriers to entry in the digital payments market. As PayPal's growth slows, more stablecoin-powered digital payment platforms could further fragment an already saturated market.

PayPal is still gradually growing as it tries to cross-sell more services to its existing users, but it's much more exposed to the shift toward stablecoins than the credit card leaders. That makes it a stock to avoid -- unless its long-shot turnaround efforts actually bear fruit.

American Express is an advertising partner of Motley Fool Money. Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends American Express, Mastercard, PayPal, and Visa. The Motley Fool recommends the following options: short June 2026 $50 calls on PayPal. The Motley Fool has a disclosure policy.