The COVID-19 crisis has accelerated the adoption of digital payments, part of a transition that Visa Inc. argues could help capitalize on opportunities many times larger than the retail market.
While Visa V,
best known for its plastic credit and debit cards, the company has made a splash in other elements of the payment universe, including cryptocurrency services, as well as payment technology that allows things like on-demand payments for workers in the giant’s economy. . The company sees new payment flows as a way to get $ 185 trillion worth of money moving out of the payment field, its president Ryan McInerney told MarketWatch, reducing the already considerable opportunity in converting the $ 17 trillion. cash dollars currently in circulation cards.
Part of Visa’s strategy to capitalize on new types of money movements was the planned $ 5.3 billion acquisition of Plaid, a company that allows users to connect their bank account credentials with popular platforms such as Venmo by PayPal Holding Inc. Visa and Plaid canceled the deal earlier this year after the Justice Department pushed, but Visa said it could expand into new payment opportunities without merging, largely through the use of its Visa Direct platform.
Visa Direct uses the company’s card rails to send payments almost the opposite of the way transactions usually take place. Consumers are familiar with the use of cards to pay for things, but Visa Direct does so so that people can use the company’s infrastructure to be paid for themselves, whether by employers, friends, government agencies, insurers or other parties. Its growth was “like a rocket ship,” McInerney said, with 3.5 billion transactions processed in the company’s last fiscal year, up from about 2 billion a year earlier.
The pandemic has drawn increasing attention to Visa Direct, including by government officials in the Dominican Republic who sought to receive money faster from citizens during the crisis, without relying solely on paper checks or direct deposits.
Visa’s work with governments to distribute COVID-19 aid funds “led to conversations about how we can use the Visa platform on an ongoing basis to bring money to citizens,” said McInerney, with Visa also offering prepaid cards through which governments can make payments. “It’s another example of the rotation that happened in the pandemic, which I think will lead to the digitization of large chunks of money movement.”
See more: Government works with large, fintech banks to speed up payments to Americans
Visa Direct also plays new ways in which people tilt workers during a pandemic. US hairdressers who once received cash tips are getting more and more advice through platforms such as PYPL by PayPal Holdings Inc.,
Venmo, for example, and Visa technology helps those workers to immediately transfer these funds to their bank accounts afterwards, if they wish.
In Russia, where customers can’t usually add tips in addition to card payments, as most transactions take place with a touch of the contactless card, a popular booking service in the beauty industry uses Visa Direct to allow customers to leave advice through its platform, McInerney said.
These newer behaviors are expected to persist as the pandemic declines, according to McInerney, while slightly older Visa Direct applications, such as payments in a giant economy, could have the opposite effect. Giant workers often rely on technology when they demand access to demand on wages earned at the end of a change, and although the travel industry stopped during the COVID-19 crisis, it is likely to return once people feel more comfortable traveling and sharing space. comfortable.
The company claims that Visa Direct offers it the opportunity to attack $ 60 billion to $ 70 billion in new types of “money movement” in general, and Moffett Nathanson analyst Lisa Ellis recently established Visa Direct’s revenue potential for remittances and payments at $ 60 billion to $ 120 billion. Visa probably catches only 1% of this opportunity at present, she estimated.
Ellis hailed Visa Direct technology and a similar iteration from rival Mastercard Inc. ME,
called Mastercard Send as “the most disruptive new capability that networks have launched in the last decade, at least.”
Visa’s embrace of new payment opportunities extends to cryptocurrencies, where the company has worked with cryptocurrencies to issue Visa cards that allow people to spend their holdings and launch software application interfaces (APIs) for customers of financial institutions who want to provide crypto. purchasing services to their customers.
“If you’re a Coinbase customer and you have a bunch of bitcoin and you want to go out to dinner, you don’t want to go through the conversion process, so Coinbase gives you a Visa card and says we’ll take care of the conversion for you,” he said. McInerney about Coinbase’s card issuing partnerships and 35 other cryptocurrency platforms.
Visa recently announced that it will soon begin allowing financial institutions to settle transactions with Visa in stable currencies, a type of digital currency that the company said will allow partners to receive Visa payments in digital currency and pay merchant customers this way if they want.
The company has not yet followed suit with Mastercard, which announced earlier this month that it intends to start allowing merchants to directly accept some cryptocurrencies, which PayPal is also doing. McInerney declined to share too much about Visa’s future cryptographic efforts, only to say that “if the crypto space takes off,” Visa wants to be “the best cryptographic partner of choice” for players in the industry.
Visa CEO Al Kelly said last month in the company’s earnings call that “to the extent that a certain digital currency becomes a recognized means of exchange, there is no reason why we cannot add it to our network.” , which already accepts over 160 coins today ”.
In addition to cryptocurrencies, Visa is also trying to attack the great opportunity it sees in commercial payments that typically take place by check or bank cable and bypass card networks.
The company estimates that there is $ 120 billion in the movement of funds that takes place between companies, including $ 10 billion that takes place between businesses that send money across borders. For this, Visa runs a platform called B2B Connect, which allows transactions between bank accounts in a way that Visa says is faster and more transparent.
“There hasn’t been a lot of innovation in this space today,” McInerney said, so it’s one of several “great opportunities to develop new flows in the Visa network.”