Visa’s announcement of its next generation electronic payments and services plans throws down the gauntlet to its competitors and raises a high execution bar for themselves. If Visa achieves most of what this announcement suggests, it will lock in and expand its dominant position in the payments world to come. If it stumbles, Visa leaves itself open to growing regional competition that could erode its position.
One thing is clear. Visa is taking its crown jewel, VisaNet, and combining it with the reach and expertise of its CyberSource and PlaySpan acquisitions. VisaNet’s network reach and the top-level position of its payments switch give it a view across virtually all payment contexts and regions. Its CyberSource expertise gives it reach into many of the largest, and smallest, of e-commerce merchants. To serve the world of virtual goods, social payments, and alternative payment and funding methods, Visa now has gaming and social payments expert PlaySpan.
In other words, it has the engines to power the payments equivalent of “galactic glue” across point of sale, e-commerce, social, and mobile money contexts. Provided those engines don’t stall.
In the announcement, Visa suggests it will connect VisaNet to domestic mobile money services like M-Pesa and G-Cash. Theoretically, that could give an M-Pesa customer in Nairobi the ability to make an e-commerce purchase with Best Buy. That’s definitely a “flat earth” payments scenario if not galactic glue.
Some key features inferred from the announcement:
• Visa is Replacing Verified by Visa. E-commerce merchants may have liked the payments security offered by Verified by Visa (VbV), but the majority didn’t like the friction VbV injected in the checkout process. Anything that negatively affects shopping cart abandonment rates is a bad thing. The new scheme must eliminate that friction through the promised “Click-to-Buy” approach. If it doesn’t, it’s VbV all over again.
• A Wallet in the Cloud. This could be the most intriguing portion of the announcement. Visa proposes to securely store payment account data for issuers and the loyalty accounts for merchants in its wallet. The release even suggests it will store non-Visa payment credentials in the wallet.
• NFC Payments and Dynamic Authentication. Visa’s promising to expand support for NFC payments via PayWave on NFC-equipped smartphones, and to expand the use of dynamic data for authentication. Hopefully, as outlined in Mercator’s recent report Authentication at the Edge: NFC, Smartphones, and a New Model for Payments Confidence, it will combine the two to truly strengthen and simplify authentication for both online and in-store transactions.
Here are a few excerpts from the announcement. Look for updates from Mercator as we learn more.
In certain countries with established electronic payments infrastructures, expansive Internet usage and broad mobile network penetration, Visa will be introducing a digital wallet and services platform. The digital wallet 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.
Visa is developing its next generation services by integrating VisaNet, its global processing network, leading credit, debit, prepaid and commercial product platforms, new capabilities it has acquired through its subsidiaries CyberSource, Authorize.net and PlaySpan, and the unique expertise and services of key commercial partners. In deploying flexible solutions that are locally relevant and globally interoperable, Visa aims to attract more participants to its network and better enable them to connect and transact.
“Our build, buy and partner approach puts Visa in a unique position to deliver the speed-to-market and scalable solutions needed to stay ahead of new demands created by the convergence of Internet, mobile and electronic payments technologies,” said Saunders. “Visa and our subsidiaries are working with financial institutions, merchants, mobile network operators, and innovative technology providers to bring new ways to pay and be paid to more consumers and merchants around the globe.”