Visa considers opportunity beyond payment – and estimates worth $ 185 trillion

Part of Visa’s strategy to capitalize on new types of money flow was its planned $ 5.3 billion purchase of Plaid, a company that allows users to link their bank account credentials to Popular platforms such as PayPal Holding Inc.’s Venmo Visa and Plaid canceled that deal earlier this year following the Justice Department’s denial, but Visa maintained it could still expand into new payment opportunities without the merger, in large part by leveraging its Visa Direct platform.

Visa Direct uses corporate card rails to send payments almost the reverse of the way transactions usually go. Consumers are used to using their cards to pay for things, but Visa Direct allows people to use corporate infrastructure to get paid for themselves, whether it’s from employers, friends, government agencies. , insurers or other parties. Its growth has been “like a rocket,” McInerney said, with 3.5 billion transactions processed in the company’s last fiscal year, up from about 2 billion a year earlier.

The pandemic has drawn increased attention to Visa Direct, including by government officials in the Dominican Republic who sought to get money to citizens faster during the crisis without relying solely on paper checks or direct deposits.

Visa’s work with governments to distribute COVID-19 relief funds “has led to discussions on how we can use the Visa platform on an ongoing basis to deliver money to citizens,” McInerney said , Visa also offers prepaid cards through which governments can make disbursements. “This is another example of the rotation that has taken place during the pandemic which I think will lead to the digitization of large movements of money.”

See more: Government partners with big banks and fintech to speed up payments to Americans

Visa Direct is also playing on new ways people tip workers during the pandemic. Hairdressers in the United States who once received cash tips are now increasingly receiving tips through platforms such as PayPal Holdings Inc.’s PYPL,
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Venmo, for example, and Visa’s technology help these workers instantly transfer those funds to their bank accounts if they so choose.

In Russia, where customers typically cannot add tips in addition to card payments because most transactions take place with a contactless card, a popular reservation service in the beauty industry uses Visa Direct to enable customers to leave tips through its platform, McInerney said. .

These new behaviors are expected to persist once the pandemic subsides, McInerney said, while Visa Direct’s slightly older applications, such as gig-economy payments, could see a rollback. Performing workers often rely on technology when asking for on-demand access to their wages earned at the end of a shift, and although the ridesharing industry has stagnated during the COVID crisis -19, it is likely to resume once people feel more comfortable travel and sharing spaces.

The company says Visa Direct gives it the ability to attack between $ 60 trillion and $ 70 trillion in new types of “money moves” across the board, and MoffettNathanson analyst Lisa Ellis recently fixed the potential for Visa Direct revenue for remittances and disbursements between $ 60 billion and $ 120 billion. Visa may only be seizing 1% of that opportunity right now, she estimated.

Ellis praised Visa Direct technology and a similar iteration of rival Mastercard Inc. MA,
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called Mastercard Send “the most disruptive new capability that networks have deployed in at least the past decade.”

Visa’s adoption of the new payment opportunities also extends to cryptocurrencies, where the company works with crypto wallets to issue Visa cards that allow people to spend their holdings and deploy software application program interfaces. (API) for customers of financial institutions who wish to offer cryptocurrencies. buy services from their customers.

“If you are a Coinbase customer and have a lot of bitcoins and want to go out for dinner you don’t want to go through the conversion process, then Coinbase gives you a Visa card and tells you that we will handle the conversion for you. McInerney said of the card issuing partnerships of the Coinbase company and about 35 other cryptocurrency platforms.

Visa recently announced that it will soon begin allowing financial institutions to settle transactions with Visa in stablecoins, a type of digital currency, which the company says would allow its partners to receive payments from Visa in digital currencies and to pay their merchant customers that way if they wanted to.

The company has yet to follow suit with Mastercard, which announced earlier this month that it plans to start allowing merchants to accept certain cryptocurrencies directly, which PayPal is also doing. McInerney declined to share too much on Visa’s future crypto efforts, only to say that “if the crypto space is going to take off,” Visa wants to be “the best crypto partner of choice” for industry players.

Visa chief executive Al Kelly said during the company’s earnings call last month that “as a specific digital currency becomes a recognized medium of exchange, there is no reason why that we can’t add it to our network, which already supports over 160 currencies today.

Outside of cryptocurrencies, Visa is also trying to attack the great opportunity it sees in commercial payments which are typically made by check or wire 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 do this, Visa runs a platform called B2B Connect that enables transactions between bank accounts in a way that Visa says is faster and more transparent.

“There hasn’t been a lot of innovation in this space today,” McInerney said, so this is one of the many “great opportunities to develop new flows on the Visa network”.