Visa Inc.’s chief executive this week questioned the drive for real-time payments by U.S. banks and merchants, but also argued Visa’s recent acquisition of business-to-business payments processor Earthport plc will help the company expand real-time payment capability beyond cardholders.
Visa closed on London-based Earthport last month after winning a bidding war with rival Mastercard Inc. The deal, which cost the card network $320.4 million, was well worth it, Alfred Kelly told the audience at an investor conference in New York City on Wednesday. Earthport will connect Visa to automated clearing house and real-time networks in 88 countries, which means “we have the ability now to move money to people we don’t have a card relationship with,” Kelly said.
The company’s Visa Direct service enables real-time push payments but requires that the receivers of funds have a Visa card. Now, Kelly said, “The capability to push funds to bank accounts has grown 100%.”
But Kelly was less enthusiastic about the concept of real-time payments in general. In recent months, The Clearing House Payments Co., a New York City-based processor owned by many of the nation’s biggest banks, as well as vendors like ACI Worldwide and Fidelity National Information Services Inc., have built or contributed technology to faster-payments systems in the U.S. Also, Mastercard in 2017 acquired another British firm, Vocalink Holdings Ltd., which designed much of the technology used by TCH and earlier built a real-time system for the United Kingdom.
Kelly questioned the purpose and reliability of competing faster-payments systems, without naming names, and argued the systems offer inadequate protection against unauthorized transfers. “Just because this fast concept is becoming a big deal doesn’t mean it’s going to have broad-based adoption,” Kelly told the audience. “I am not convinced these [services] are going to take off like crazy.”
He zeroed in on the matter of fraud protections in an environment where value travels between accounts in a matter of seconds. Some networks, he said, “don’t have the same protections you have in a payments ecosystem.” Transactions are irrevocable, he said, raising the question, “if I now have a dispute with you or some element of chargeback with you, how is that going to work? With great difficulty would be the answer.”
A spokesman for TCH, whose Real Time Payments platform began operating in 2017 and now serves 15 financial institutions, said the company would not comment on Kelly’s remarks.
Kelly was more sanguine about the opportunity real-time systems could open up for Visa. “We have all sorts of value-add for them,” he said. “We’re open to talking.”