Visa’s mandate, as explained by Carleligh Jaques – Head of Corporate Development and M&A, Visa – at Web 2.0 Expo NY 2011, is to convert cash and check transactions to electronic transactions and to do it in a safe, secure and seamless manner across all environments: brick-and-mortar establishments, e-commerce, digital commerce, mobile commerce… They want to provide tools and capabilities to consumers, merchants and banks that will deliver clear benefits to everyone while helping Visa generate new revenue streams and strengthen its position as a facilitator of electronic funds transfers.
Although Visa sees itself as a technology company, electronic funds transfers is Visa’s core business and this will not change overnight. Their strengths are:
a) The size and efficiency of their existing network (VisaNet).
b) Their strong ties with consumers, banks and merchants: 2 billion cards outstanding, agreements with 13 thousand financial institutions and 30 million merchants.
Let's first discuss the Visa Wallet solution, which should be released this fall in the US and Canada, and next week, analyse Visa's key acquisitions, investments and partnerships.
The service is built on the VisaNet processing network, existing credit / debit / prepaid / commercial product platforms and new capabilities from its acquired companies. The plan is for Visa Wallet to go live in the US and Canada during fall of this year – almost at the same time as Google Wallet.
Visa is very aware of the barriers of adoption for this technology and, as Steve Perry, commercial director for Visa Europe, explains: ‘If the digital wallet isn’t as sexy as my current wallet, then it won’t take off’. This is probably the reason why they have taken quite a different approach to other incumbents and gone with a solution very similar to that of Google: An open wallet that will allow users to include all types of credit / debit / pre-paid cards - Visa/Mastercard/AmEx/others -, as well as all kinds of loyalty and rewards cards and even, possibly, different forms of ID such as driver license information. Bill Gajda, global head for Visa Mobile, said he doesn't necessarily view Google as a competitor but, after analysing both companies' strategies, the similarities are quite striking.
Visa Wallet's key characteristics:
1) Click-to-buy: Consumers will be able to make purchases online by simply entering an email address, alias or online ID and a password, instead of a billing address, account number and expiration date. In addition, Visa says it is "exploring dynamic authentication technologies that will bring added layers of security to online purchases.
2) Cross-channel payments: The wallet will be able to store multiple Visa and non-Visa payments accounts and it will be possible to use it in mobile, ecommerce, social network and retail point-of-sale environments. The plan is to also include the capability to look at spending across all cards and maybe even to perform some basic banking transactions, although this would require agreements with banks and financial intermediaries.
3) Preference management: A menu will enable consumers to set preferences for how their wallet will work, allowing them to customize and control the features of their personal wallet. This will allow them to choose privacy setting options and designate which the default account will be at particular types of merchant or for particular purchase amounts.
4) Merchant offers: Consumers will be able to personalise their shopping experience by opting-in to receive money-saving discounts or promotions from participating merchants.
You can watch a short video where Jim McCarthy, Visa Head of Product Development, describes Visa's vision for the digital wallet.
Main differences between Google's and Visa's approach:
1) Visa will charge a fee to the retailer for each client that pays using its solution while Google will not. This means that, most likely, merchants will favor Google's solution but the consumer will have the final say based on the benefits and convenience of each of the solutions. The difference in approach is probably due to the different business models: Google doesn't charge for its services and generates revenue via advertising; Visa has always charged for its services and has done so on a transaction-by-transaction basis. Both companies are transferring their traditional 'modus-operandi' to this new service.
2) Visa plans to leverage its financial reputation initially marketing the digital wallet service through banks. A participating bank could offer the digital wallet application - with all or some of its capabilities - as part of their online banking service. By marketing the service first to online banking customers or directly through its own Visa Web site to online users, Gadja believes the company will have a chance to build an audience before NFC technology becomes more widely available: 'Banks will be an important distribution channel for the digital wallets, [...] So that's why we will first target these online customers by providing one-click shopping. And then we'll promote NFC.'
The Retrevo Pulse, a research firm that tracks trends and consumer demand in real-time, has just finished a poll around mobile payments including more than 1,000 US consumer of varying ages and backgrounds. The key question was: Who would you like to be the provider of your digital wallet? In the study, smartphone owners tended to lean toward their phone operating system with 61% of iPhone owners prefering Apple as their provider and 46% of Androd owners prefering the Google Wallet. The most interesting finding though was that all providers closely associated with credit cards and cell phones ranked consistently below Google and Apple when looking across all smartphone owners. For example, MasterCard/Visa/AmEx (32%), AT&T/Verizon/Others (26%).
Visa in Europe:
After the US, Europe is Visa’s second largest market. The European version of Visa Wallet will launch in August / September of 2012. No specific explanation has been given for the delay with respect to the US / Canadian wallets but it is probably tied to the fact that Visa wants to make it available across all of Europe and not just the Eurozone, which means they will need to support a number of currencies and comply with a myriad of different legislations.
In the meantime, as announced by Visa Europe CEO Peter Ayliffe at the EFMA conference in Paris, Visa will launch in Europe a mobile person-to-person payment system developed in partnership with Monitise. Visa Mobile Person-to-Person allows registered users to transfer funds to any Visa cardholder in Europe from their mobile phone. The app makes it easy to send money to an address book contact, to a mobile phone number, or to a specific Visa card number – whether or not the recipient is registered with the service. Launching this service will allow Visa to gain mind-share with consumers in preparation for next year’s launch.
Visa's involvement in other Wallets:
Although we have focused on Visa Wallet in this article, the company is hedging its bets and is also participating in the payment solutions designed by Google and Isis. The same way that it wants Visa Wallet to be open to all competitors to build the most convenient solution for its clients, it wants to be available across all possible channels to provide convenience to those same clients irrespective of their choice of wallet. This is an extremely smart move from Visa.
Although we still need to review Visa's key acquisitions, investment and partnerships - which have been fundamental in their ability to build a digital wallet - just based on what we have discussed, it is fair to say that Visa is not resting on its laurels when it comes to mobile commerce and that it is ready to compete with all players, new and established, across all areas and markets.