The world's first! Mastercard and Ripple explore XRPL for card transaction settlements

Mastercard, the credit card giant, announced on Wednesday that it will collaborate with Ripple to explore using the RLUSD stablecoin on the XRP Ledger (XRPL) for settlement of card transactions. The statement indicates that once implemented, this will be one of the first collaborations where a regulated U.S. bank uses a regulated stablecoin on a public blockchain to settle traditional credit card transactions. XRPL is an open-source blockchain primarily used to enhance payment functionalities.

Why Mastercard Chose Ripple and XRPL

(Source: Ripple)

On November 5, Mastercard revealed that it will work with Ripple to explore using the RLUSD stablecoin on XRPL to settle card transactions. This partnership is historically significant because it bridges a key gap between traditional finance and blockchain technology. The credit card settlement system is a core part of the global financial infrastructure, processing billions of transactions daily. Moving this system onto a blockchain, especially using stablecoins for settlement, represents a major paradigm shift in payment technology.

XRPL (XRP Ledger) is an open-source blockchain mainly designed to improve payment capabilities. Ripple is the primary advocate of this blockchain. XRPL’s technical features make it particularly suitable for payments. First, speed: transactions on XRPL can be confirmed within 3 to 5 seconds, much faster than Bitcoin (~10 minutes) and Ethereum (~12 seconds). Second, cost: transaction fees on XRPL are typically below $0.0001, almost negligible. Third, throughput: XRPL can theoretically handle up to 1,500 transactions per second, maintaining high processing capacity in practical applications.

The Ripple stablecoin RLUSD is a key component of this partnership. RLUSD is a USD-pegged stablecoin issued by Ripple, backed by USD reserves and short-term U.S. Treasuries. Its market cap has surpassed $1 billion, making it one of the top ten stablecoins. In this collaboration, RLUSD will serve as the settlement currency, linking traditional fiat credit card transactions with blockchain settlement systems.

Mastercard’s choice of Ripple and XRPL over other blockchains like Ethereum or Solana likely stems from several considerations. First, Ripple has extensive experience in cross-border payments and partnerships with over 300 financial institutions worldwide. Second, XRPL’s technical features—speed, low cost, high throughput—are ideal for high-frequency payment scenarios. Third, Ripple’s good relationships with regulators, especially after recent favorable rulings in SEC lawsuits, provide regulatory assurance.

Milestone Significance of the First Regulated Blockchain Card Settlement

The statement says: “Once implemented, this will mark one of the first collaborations where a regulated U.S. bank uses a regulated stablecoin on a public blockchain to settle traditional credit card transactions.” Three key qualifiers define the historic significance: “regulated U.S. bank,” “public blockchain,” and “regulated stablecoin.” These terms collectively highlight the groundbreaking nature of this initiative.

“Regulated U.S. bank” refers to WebBank, a Utah-chartered bank supervised by the FDIC. WebBank has extensive experience in fintech, providing banking licenses and services to companies like Affirm and Klarna. Using a regulated bank as the issuer means this isn’t an experiment in regulatory gray areas but operates within a fully compliant framework.

“Public blockchain” emphasizes XRPL’s openness and transparency. Unlike private or permissioned blockchains, transactions on a public blockchain are visible to everyone. Anyone can run a node and participate in the network. This transparency offers additional auditability and resistance to censorship, though transaction data (even if anonymous) is publicly accessible.

“Regulated stablecoin” refers to RLUSD. Ripple adheres to strict compliance standards when issuing RLUSD, including third-party audits of reserves, AML, and KYC procedures. This contrasts with some unregulated stablecoins like early USDT, which faced scrutiny over reserve transparency.

Three Major Breakthroughs of This Collaboration

Regulatory Compliance Breakthrough: First integration of a regulated bank, public blockchain, and regulated stablecoin into a single payment solution.

Technical Integration Breakthrough: Successful connection of traditional credit card networks with blockchain settlement systems, enabling seamless interoperability.

Business Model Breakthrough: Providing a lower-cost, faster settlement infrastructure for crypto rewards credit cards.

The long-term impact of this partnership could extend far beyond credit card settlement. It demonstrates that blockchain technology can be integrated into the core of traditional financial infrastructure, not just as an ancillary service. If successful, it could pave the way for other payment networks like Visa and financial institutions to adopt similar technologies.

Mastercard Accelerates Embrace of Blockchain Ecosystem

Mastercard continues to strengthen ties with digital asset companies and technology providers. Notably, in June, the company partnered with Chainlink to enable consumers to “convert fiat to crypto securely and directly on-chain,” allowing direct crypto purchases with Mastercard without going through traditional exchanges.

On Wednesday, digital identity solutions provider Humanity Protocol announced a partnership with Mastercard. The statement says this will “enable users to access credit, loans, and real-world financial services through open finance technology via Humanity Protocol.” This indicates Mastercard’s exploration of blockchain extends beyond payments to include identity verification, credit assessment, and financial inclusion.

These collaborations reflect a strategic shift for Mastercard from initial caution and resistance to active participation and experimentation with blockchain technology. Recognizing that blockchain isn’t going away, Mastercard is choosing to embrace and shape its development rather than be displaced by it. Through partnerships with Ripple, Chainlink, and other blockchain projects, Mastercard is positioning itself as a bridge between traditional finance and decentralized finance.