The COVID-19 crisis has accelerated the adoption of digital payments, part of a transition that Visa Inc. argues that it could help seize opportunities that are worth many times more than the retail payments market.
While Visa V,
is best known for its plastic credit and debit cards, the company has been pushing other elements of the payments universe, including cryptocurrency services, as well as disbursement technology that allows you to make payments on demand. to the workers of the concerted economy. The company sees new pay flows as a way to get $ 185 trillion in money moving out of the box office, its chairman Ryan McInerney told MarketWatch, eliminating the already considerable opportunity that exists to convert the $ 17 trillion in cash currently in circulation on cards.
Part of Visa’s strategy to capitalize on new types of money movements was the planned purchase of $ 5.3 billion from Plaid, a company that allows users to link their bank account credentials with popular platforms like Venmo from PayPal Holding Inc. . Visa and Plaid rescinded the deal earlier this year after the Justice Department stepped back, but Visa has maintained that it can still expand into new payment opportunities without the merger, largely by leveraging its Visa Direct platform.
Visa Direct makes use of the company’s card rails to send payments almost the other way around as transactions usually take place. Consumers are familiar with the use of their cards to pay for things, but Visa Direct does so so that people can use the company’s infrastructure to charge themselves, whether for business, friends, government agencies, insurers. or other parts. Its growth has been “like a rocket,” McInerney said, with 3.5 billion transactions processed during the company’s last fiscal year, up from 2 billion the previous year.
The pandemic has caught the attention of Visa Direct, even by government officials in the Dominican Republic who sought to get money from citizens more quickly during the crisis without relying solely on paper checks or direct deposits.
Visa’s work with governments to distribute COVID-19 relief funds “sparked conversations about how we can use the Visa platform on an ongoing basis to get money from citizens,” McInerney said, with Visa also offering prepaid cards to through which governments can make disbursements. “It’s another example of a rotation that has happened in the pandemic that I think will lead to the digitization of large chunks of money movement.”
See more: The government is partnering with big banks and fintech technology to speed up payments to Americans
Visa Direct also plays into the new ways in which people claim workers during the pandemic. U.S. hairdressers who previously received cash advice are increasingly receiving advice through platforms such as PayPal Holdings Inc.’s PYPL,
Venmo, for example, and Visa technology help workers immediately transfer these funds to their bank accounts later if they wish.
In Russia, where customers do not usually add tips in addition to card payments, as most transactions are done with a touch of contactless card, a popular booking service in the beauty industry uses Visa Direct to allow customers leave tips through their platform, McInerney said. .
According to McInerney, these new behaviors are expected to persist once the pandemic subsides, while slightly old Visa Direct applications, such as payments in the form of a concerted economy, could see a setback. Group workers often rely on technology when applying for access to demand on their wages earned at the end of a shift, and although the attraction industry has stagnated during the COVID-19 crisis , is likely to recover once people feel like traveling and sharing more comfortable spaces.
The company argues that Visa Direct gives it a chance to attack between $ 60 trillion and $ 70 trillion in new types of “money movement” in general, and Moffett Nathanson analyst Lisa Ellis recently set the revenue potential of Visa Direct for remittances and disbursements in $ 60 billion to $ 120 billion. . According to his estimate, Visa may only capture 1% of this opportunity.
Ellis hosted Visa Direct technology and a similar iteration of rival Mastercard Inc. MA,
called Mastercard Send as “the most disruptive new capability that networks have deployed in the last decade, at least.”
The embrace of new Visa payment opportunities also extends to cryptocurrencies, where the company has been working with cryptocurrencies to issue Visa cards that allow people to spend their holdings and deploy application program interfaces. software (API) for customers of financial institutions who want to offer cryptography. purchasing services to its customers.
“If you’re a Coinbase customer and you have a lot of bitcoins and you want to go out to dinner, you don’t want to do the conversion process, so Coinbase gives you a Visa card and says we’ll handle the conversion. For you,” McInerney said. about the card issuing associations of the company Coinbase and about 35 more cryptocurrency platforms.
Visa recently announced that it would soon begin allowing financial institutions to settle Visa transactions in digital currencies, a type of digital currency, which the company said would allow its partners to receive Visa payments in digital currencies and thus pay their customers. commercial wanted.
The company has yet to follow suit with Mastercard, which announced earlier this month that it plans to start allowing merchants to directly accept some cryptocurrencies, which PayPal is also doing. McInerney declined to share too much about Visa’s future cryptography efforts, only to say that “if the cryptographic space takes off,” Visa wants to be “the best cryptography partner you choose” for players in the industry.
Visa chief executive Al Kelly said in the company’s profit call last month that “to the extent that a specific digital currency becomes a recognized medium of exchange, there is no reason why we can’t add it to our network, which currently supports more than 160 currencies. “
Outside of cryptocurrencies, Visa is also trying to attack the great opportunity they see in commercial payments that typically take place by check or cable and bypass card networks.
The company estimates that there is a $ 120 trillion fund movement between companies, including $ 10 billion between companies sending money across borders. To do this, Visa has a platform called B2B Connect that allows transactions between bank accounts in a way that Visa says is faster and more transparent.
“There hasn’t been much innovation in this space today,” McInerney said, so it represents one of the “great opportunities to grow new flows in the Visa network.”