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13th May 2011

Visa - ditching the card for the phone?
Opinion

Visa Inc. issued an important, radical and surprisingly open media release regarding its future plans including a redefinition of its business, some of the future payment products planned and how it categorises markets globally.


Visa left nobody in doubt that its focus is as a payments business and that this "will replicate the ease, reliability and security of Visa point-of-sale payments within traditional and digital eCommerce, mobile commerce and burgeoning social networking commerce environments. New offerings are expected to include a secure cross-channel digital wallet and a range of customized mobile payments services that address the specific requirements of geographic markets around the world".


The company went on to make two points putting some previous announcements and decisions into conetext. First that it was committed to "build, buy and partner" in order to be able to deliver speed to market and scalable products in the fast changing markets. Secondly it believed that convergence was here and was backing this belief with its whole future strategy, some of which is detailed below. In fact, its method of dividing the world into different markets is based upon the number of converging factors existing in that region.


The US and Western Europe are considered 'complex economies' defined as "with established electronic payments infrastructures, expansive Internet usage and broad mobile network penetration". For this market Visa has announced the Digital Wallet. This will store Visa and non-Visa payments accounts, support NFC payments through the innovative Visa payWave application and deliver a wide range of transaction services to accommodate multiple commerce scenarios—including eCommerce, mobile commerce, micropayments, social networks and person-to-person payments".
More specifically the features of the wallet are listed as:

- Click-to-buy: Shop conveniently and securely by simply entering an email address, alias or online ID and password, instead of a billing address, account number and expiration date. In addition, Visa is exploring dynamic authentication technologies that will bring added layers of security to online purchases.

- Cross-channel payments solution: The wallet consolidates multiple Visa and non-Visa payments accounts and can be used in mobile, eCommerce, social network and retail point-of-sale environments.
Preference management: A menu that enables consumers to set preferences for how their wallet will work, allowing them to customize and control the features of their personal wallet from privacy settings to designating which account will be accessed based on merchant type or purchase amount.

Merchant offers: A service that allows consumers to personalize their shopping experience by opting-in to receive money-saving discounts or promotions from participating merchants.


The wallet is to be available in the US in autumn of this year. The list of banks the wallet is under development with is interesting. Whilst important banks in the US the participants are by no means the largest banks or credit card issuers. The list is:
Barclaycard US
BB&T Corporation
Card Services for Credit Unions (CSCU)
ICBA Bancard
First Financial Bank of Ohio
Nordstrom fsb
Pentagon Federal Credit Union
PNC Bank
PSCU Financial Services
Regions Bank
Royal Bank of Canada
Scotiabank
TD Bank Group (US and Canada)
US Bank


For other regions of the world Visa presented two major scenarios. First where there is mobile penetration but little in the way of banking and card penetration. Here Visa plans to work with mobile networks and financial institutions. The idea is "to link new virtual mobile prepaid Visa accounts to mobile phone numbers to enable cash-in, cash-out, personal payments and mobile payments --including bill payments and wireless airtime top-up. Visa also intends to connect existing "closed loop" mobile money services that today provide basic mobile banking and payments services to unbanked and under-banked consumers to its global, open loop network--VisaNet. The integration will open closed loop systems, and provide consumers and merchants with unprecedented scale, functionality and acceptance beyond their existing local geographic footprints."

The other scenario mentioned is where there is some banking and card penetration however usage is low. India and Russia are given as examples. Here, Visa states that it will help drive account activation and usage by working with financial institutions and mobile operators to link existing card portfolios with mobile devices to give handsets payments functionality.


One of the many issues the announcement raises is what will happen to PayPal? One scenario could be that MasterCard may buy them to try and catch up some the ever-widening gap between the two old rivals.