Let’s, as we did with AmEx, review some of Visa’s key acquisitions, investments and partnerships: 1) Monitise
In June, after several years of continued cooperation, Visa and Monitise have entered a five-year global strategic alliance agreement to develop a suite of mobile services, including payments, money transfers, transaction alerts and marketing offers. Per terms of the deal, Visa will acquire a 14.4 percent stake in Monitise valued at $13 million. Monitise services enable customers of multiple banks and mobile operators to perform banking and payment transactions directly from their handsets--the firm offers live services in the U.S. and the U.K. in partnership with Metavante
(now part of FIS Global) and VocaLink
.This alliance has two main initial focuses
1) Introduction of new mobile services to existing Visa account holders outside the US that enable electronic payments on the go to meet consumers' daily needs, including mobile top-up, utility payments, and transit ticketing.
2) In addition, the partners will launch a mobile banking solution in the US for clients of Visa DPS, Visa's debit and prepaid processing platform. This new service is designed to enable Visa clients and processing partners in the US to quickly and efficiently offer their customers a suite of services, such as mobile payments, person-to-person payments, mobile transaction alerts and mobile marketing offers.In the words of Tim Attinger
, Head of Global Product Innovation at Visa Inc: 'In aligning with Monitise, we expect to expand the delivery of Visa mobile services to consumers around the globe, enabling them to seamlessly use their mobile phones to purchase goods and services, make payments, receive valuable information and offers, and transfer money between accounts, in a safe and secure manner.' 2) Fundamo
At the same time Visa entered its global strategic alliance with Monitise, it acquired Fundamo
- a specialist mobile financial services provider to network operators and financial institutions in developing economies - for $110m to spur its global push into the payments space to enable transactions across cards, computers and mobiles.
This means, in particular, that Visa will reach Africa’s, Asia’s and Latin America’s unbanked and under-banked population with P2P payment, bill payments and branchless banking services.
Fundamo has over 50 active mobile financial services deployments across more than 40 countries, of which 27 are in Africa, Asia and the Middle East alone, serving 5 million registered subscribersIn an official statement
, Visa explained the dual action with Fundamo and Monitise in the following way: 'The combination of acquiring Fundamo and expanding the relationship with Monitise will enable Visa to deliver best-in-class mobile financial services and payments capabilities to consumers across the full spectrum of uses, geographies and mobile environments from basic services on simple handsets to more advanced services for smart phone owners.' 3) PlaySpan
In February of this year, Visa acquired PlaySpan
, a mobile payment company that enables the purchase of digital goods in the online space, providing online merchants with tools to monetize their digital content such as in-game credits, premium memberships and digital goods. The transaction cost Visa approximately $190 million in cash with additional consideration for performance milestones.
PlaySpan’s flagship product UltimatePay
is a ‘Monetization as a Service’ platform for apps, games, videos and digital goods. Based on the user’s location, the payments platform draws from over 85 different payment options. The company also recently launched a mobile version
of UltimatePay, which gives smartphone developers a way to deliver a one-click payment experience to mobile gamers, and provide a comprehensive payments offering. The mobile focused platform allows players to view their balance and transaction history, while allowing them to purchase items in-app without ever having to leave the game. 4) CyberSource This has been Visa's largest acquisition in the mobile space to date
for a total of approximately $2 billion. CyberSource is an established industry leader that plays a role in processing approximately 25 percent of all eCommerce dollars transacted in the United States. The company serves more than 295,000 merchants through its CyberSource and Authorize.Net branded solutions. CyberSource clients include British Airways, Home Depot, Facebook, Google and many small businesses.
CyberSource is a gateway, a sort of 'middleware'
that stands between the merchant and the processor / acquiring bank and that allows retailers to interact with a single interface independently of geography, processor and bank. Basically gateways:
1) Encrypt payments and personal data
2) Communicate between the customer, business and financial institutions
3) Participate in the process of authorising payments
In addition to simplifying the payment process, gateways can also provide value-added services such as tools to:
1) Automatically screen orders for fraud and calculate tax in real time prior to the authorization request being sent to the processor
2) Detect fraud including geolocation
, velocity pattern analysis, delivery address verification, computer finger printing technology, identity morphing detection, and basic AVS
Many in the industry do not believe that it makes sense for visa to enter the gateway business. Some of the reasons why it does make sense could be
1) Truly enhanced fraud prevention tools - Visa and other payment system providers see much more data at the macro level than anyone else, but thus far have been largely absent from offering merchant-centric fraud prevention tools
2) The ability to provide a packaged offering to merchants around the world that would streamline their path to eCommerce sales
3) The ability to support 'end-to-end' encryption from physical POS devices versus current 'point-to-point'
In addition, and just as interstingly, this acquisition allows them to be more directly involved with merchants and retailers since, many of them, were not dealing with the credit card processors directly but rather via the gateways. In the process of developing and extending their reach within mobile payments and mobile commerce, the strength of these relationships will be extremely beneficial.
Visa has voiced in many occasions its interest in helping the consumers and retailers of all sizes move from cash and checks to electronic means of payments, including credit / debit / pre-paid cards. Investment in Square – an app / dongle combo that allows users to accept credit / debit card payments on their iPad, iPhone or Android device –, as part of the $27.5 million round led by Sequoia Capital in February of this year, is part of this effort. John Partridge, the president of Visa, said
: “Square’s early success suggests that using Square and a mobile device, new types of merchants will now be able to accept payment and help grow their business via Visa’s global network with the security, speed and reliability we provide.” Jack Dorsey explained
how Square planned to use the funds: 'The plan includes growing the team, both in engineering and design, and increasing the awareness of Square, which means expanding the user base to the plumber, the piano teacher and the dog walker. As for product innovation, we will do a lot with the receipt to make it interactive instead of something we throw away.'
Although it was not planned, the new funding will probably also have to be used to counteract Verifone's allegations of lack of security within the Square dongle
which, according to Square's rival, cannot verify it is connecting with the real Square application and not with some knock-off app that could be stealing the card-holder's information for future fraudulent use. Square has defended itself from these acusations even pointing out that its high-profile strategic partner and credit card processor, JP Morgan Chase, continuously checks Square's security and capabilities and has not yet found any securities issues with the dongle or the software application. The argument rumbles on as Verifone has now created a video explaining its concern
Just as American Express, Visa is fully engaged in mobile payments and mobile commerce. Although both companies have slightly different approaches to this challenge, they are developing strong capabilities that will allow them to adopt any wining strategies deployed by their peers and competitors fairly quickly. Competition is heating up!