The COVID-19 crisis accelerated the adoption of digital payments, part of a transition that Visa Inc. argues could help it seize opportunities that are worth far more than the retail payments market.
While Visa V,
best known for its plastic credit and debit cards, the company has given a boost to other elements of the payments universe, including cryptocurrency services, as well as disbursement technology that allows things like on-demand payments to workers with huge savings. The company sees new payment flows as a way to earn $ 185 trillion in cash out of the cash scenario, its president Ryan McInerney told MarketWatch, overshadowing the already considerable opportunity that exists in converting the $ 17 trillion in cash currently in circulation for cards.
Part of Visa’s strategy to capitalize on new types of cash movements was the planned $ 5.3 billion purchase of Plaid, a company that allows users to link their bank account credentials with popular platforms like Venmo, from PayPal Holding Inc Visa and Plaid canceled the deal earlier this year, following resistance from the Justice Department, but Visa said it could still expand into new payment opportunities without the merger, largely leveraging its Visa Direct platform.
Visa Direct uses the company’s card tracks to send payments almost as opposed to how transactions normally take place. Consumers are familiar with using their cards to pay for things, but Visa Direct makes it possible for people to use the company’s infrastructure to be paid, whether by employers, friends, government agencies, insurance companies or other parties. Its growth has been “like a rocket,” said McInerney, with 3.5 billion transactions processed during the company’s last fiscal year, up from about 2 billion the previous year.
The pandemic attracted more attention to Visa Direct, including by government officials in the Dominican Republic who sought to bring money to citizens more quickly during the crisis, without relying solely on paper checks or direct deposits.
Visa’s work with governments to distribute COVID-19 aid funds “has 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 from which governments can make disbursements. “It is another example of the rotation that occurred in the pandemic that, I believe, will lead to the digitization of large volumes of money movements.”
See more: Government is partnering with major banks, fintech to streamline payments to Americans
Visa Direct also shows the new ways in which people are tipping workers during the pandemic. Hairdressers in the U.S. who previously received cash tips are now increasingly accepting tips through platforms like PayPal Holdings Inc.’s PYPL,
Venmo, for example, and Visa technology help these workers to instantly transfer these funds to their bank accounts, if they so desire.
In Russia, where customers generally cannot add tips to card payments because most transactions occur with a touch of a contactless card, a popular booking service in the beauty industry is using Visa Direct to allow customers to tip for through its platform, said McInerney. .
These new behaviors are expected to persist once the pandemic subsides, in McInerney’s view, while slightly older Visa Direct applications, such as payments in large savings, may see a setback. Concert workers generally rely on technology when they request on-demand access to their salaries earned at the end of a shift, and although the hitchhiking industry stalled during the COVID-19 crisis, it is likely to recover again when people feel more comfortable to travel and share spaces.
The company argues that Visa Direct gives it the ability to attack $ 60 trillion to $ 70 trillion in new types of “cash movement” overall, and MoffettNathanson analyst Lisa Ellis recently set the revenue potential for the Visa Direct for remittances and disbursements of $ 60 billion to $ 120 billion. Visa captures perhaps just 1% of that opportunity today, she estimated.
Ellis welcomed Visa Direct technology and a similar iteration from rival Mastercard Inc. MA,
called Mastercard Send as “the single most upsetting new feature that networks have launched in the last decade, at least”.
Visa’s adherence to new payment opportunities also extends to cryptocurrencies, where the company has been working with cryptographic wallets to issue Visa cards that allow people to spend their possessions and implementing software program interfaces (APIs) for customers of financial institutions who wish to offer encryption purchase services to their customers.
“If you are a Coinbase customer and have a lot of bitcoins and want to go out to dinner, do not want to go through the conversion process, then Coinbase gives you a Visa card and says that we will take care of the conversion for you,” said McInerney of the Coinbase card issuing partnerships and around 35 other cryptocurrency platforms.
Visa recently announced that it will soon begin to allow financial institutions to settle transactions with Visa in stablecoins, a type of digital currency, which the company said would allow its partners to receive Visa payments in digital currencies and pay their commercial customers for digital currency. way if they searched.
The company has yet to do the same with Mastercard, which announced earlier this month that it planned to start allowing merchants to accept some cryptocurrencies directly, something PayPal is also doing. McInerney refused to share much about Visa’s future crypto endeavors, just to say that “if the crypto space is going to take off,” Visa wants to be “the best cryptographic partner of choice” for players in the industry.
Visa Chief Executive Al Kelly said on the company’s earnings conference call last month that “as a specific digital currency becomes a recognized medium of exchange, there is no reason why we cannot add it to our network , which already supports more than 160 currencies today. “
Outside of cryptocurrencies, Visa is also trying to attack the huge opportunity it sees in commercial payments that normally occur by check or bank transfer and bypass card networks.
The company estimates that there is $ 120 trillion in movement of funds between companies, including $ 10 billion between companies that send money across borders. To this end, Visa operates a platform called B2B Connect that enables transactions between bank accounts in a way that Visa claims to be faster and more transparent.
“There hasn’t been much innovation in that space today,” said McInerney, so it represents one of several “great opportunities to increase new flows to the Visa network”.