Can Visa+ Transform P2P Payments?

Peer-to-peer transfers have turned into big business, but one nagging problem remains: there’s no interoperability between networks. Visa is forging a solution, though there are complications. 

Peer-to-peer payments have in a relatively short period of time become ingrained in consumers’ daily lives. Whether it’s sending a family member birthday cash, money to a child at college, or repaying a friend for lunch, P2P payments make it easy and convenient to send money within minutes without having to visit a bank or ATM.

This has resulted in explosive growth. In 2022, global P2P payments totaled $3.04 billion, up from $2.62 billion in 2022, a 16.4% increase, according to The Business Research Company. Asia-Pacific was the largest region for P2P payments, followed by North America. The market is projected to grow at a 16.5% compound annual growth rate, reaching a total of $5.61 billion in 2027.

On a user basis, 64% of adults sent or received a payment through a P2P app in 2022, according to Consumer Reports Inc. Among consumers 18 to 29, that figure rose to 81%. Consumer Reports’ data is based on a nationwide survey of 2,116 adults in March of 2022. In addition, 40% of respondents said they used a P2P app at least once a month, with 18% using an app at least once a week.

But for all the growth in P2P usage, one thing has been lacking: network interoperability. Despite the availability of extensive P2P networks owned by resourceful corporate parents—major examples include Venmo, Zelle, and CashApp—consumers can send money only to other users within the same network. A Zelle user, for example, must find some other way to send money to a Venmo user.

As a result, many consumers have downloaded more than one P2P app to ensure they can send money to family and friends, and even small businesses, using the recipient’s preferred network. That’s cumbersome.

“Network interoperability is important, as consumers rely more on different forms of digital payments,” says Delicia Hand, director of financial fairness for Consumer Reports. “Our research shows that younger consumers use four to five P2P apps. Consumers shouldn’t have to download a new app each time that want to send or receive a P2P payment.”

‘Head Scratcher’

What’s the solution? Sensing a big opportunity to stimulate more P2P volume across networks, Visa Inc. in April announced Visa+, a so-called network-of-networks for P2P payments.

The aim of Visa+ is to enable consumers to send P2P payments to anyone, regardless of the networks the sender and recipient use. It is also a response to growing consumer demand for interoperability among P2P networks, Visa says. Its research reveals that 60% of surveyed P2P app users have had to download another app to send money to someone, and that 79% of respondents were interested in being able to send and receive funds across different apps.

“From our experience in the history of payments, closed-loop systems can prove to be a challenging long-term strategy from a growth perspective,” says Chris Newkirk, global head of commercial and money movement solutions for Visa.

“Like what you see in the streaming market with the proliferation of services, there’s only so much user growth, and eventually these networks will need to look at other ways to continue growing. That’s where interoperability comes in.”

The introduction of Visa+ is an ambitious gambit, and one sorely needed in the P2P space, payments experts say. But it is by no means a slam dunk. Challenges facing Visa+ and its partners include transaction security, consumer awareness, and speed of rollout. But the biggest challenge looming over the project is whether Visa can get all the major P2P networks on board.

So far, Visa has assembled an impressive roster of networks for the initial trial of Visa+, scheduled for later this year. These include PayPal and Venmo, which, surprisingly, are not interoperable despite PayPal’s ownership of Venmo, among the largest of the dedicated P2P apps (chart, page 26). Other networks signed to come onboard include DailyPay, i2c, TabaPay, and Western Union.

Conspicuously absent from the list of network partners, however, are Zelle, which is operated by bank-owned Early Warning Services LLC, and Block Inc.’s Cash App.

Both networks are key players in the P2P business, with Zelle having been adopted by 40% of P2P users in the U.S., according to J.D. Power, while Cash App has 52.9 million users in the U.S., according to Insider Intelligence (formerly eMarketer).

“If Visa wants Visa+ to be successful in North America, they are going to need Zelle on board,” says Thad Peterson, a strategic advisor for Aite-Novarica Group, a payments consulting firm.

For now, Zelle is mum on whether it intends to join Visa+. The network, which declined an interview request, says by email that it is not currently working with Visa+ but is always open to expanding its offerings to “democratize money movement” for all. When asked by email about the prospects of other P2P networks, such as Zelle and Cash App, joining Visa+, Visa did not respond.

Zelle’s absence from the initial list of partners is something of a head-scratcher, as the banks that own Early Warning are Visa members, says Peterson. “I see Visa+ attracting a lot of P2P networks in North America as network interoperability is essential to the growth of P2P payments, but for now Zelle is not part of Visa+,” he adds.

Some observers speculate that Zelle has chosen to remain on the sidelines as Visa+ ramps up so that it can focus on its Paze digital wallet. Paze, which was announced in March and will begin its pilot stage this summer, is aimed exclusively at e-commerce use and will be available to all banks, according to Early Warning. The wallet is scheduled to begin rolling out this fall.

Still, even if Zelle does come onboard later on, Visa+ will still need Cash App. “Without Cash App, Visa+ will lack ubiquity,” says industry expert Sarah Grotta “Clearly, P2P networks such as Zelle and Cash App have been successful without Visa+.”

‘A Big Hurdle’

To initiate payments between P2P networks using Visa+, consumers must create a so-called payname, which they set up in the P2P app they prefer to use. The user can then share her payname with anyone she pays or wants to receive payments from, using the payment app linked to that payname.

Although Visa bills the service as moving funds in real time, funds availability will depend on the banks involved in the transfer and the region they are in, the card company cautions.

While interoperability will make it easier for consumers to send and receive P2P payments, security will remain an issue, as it does with all other payment systems. Cybercriminals are certain to find ways to exploit the new connectivity between networks.

“As apps and accounts become more connected, there is a risk of scams,” says Hand. “If consumers treat a P2P account the same as a depository account, shouldn’t they have the same level of security as they do around a depository account? Payments scams evolve.”

Consumer awareness about network interoperability will play a big role in the success of Visa+. One reason is that many consumers have formed negative opinions, or have misconceptions, about P2P apps they don’t use, says John Cabell, managing director, intelligence, for J.D. Power. “Consumer awareness is a going to be a big hurdle to overcome,” he adds.

Another hurdle is whether consumers who don’t have a Visa-branded card will realize they can use Visa+ once it rolls out. “Visa typically ties its products to its cards, so it’s questionable whether non-Visa cardholders will realize they can use the network,” says Peterson.

One way to build awareness about network interoperability is for participating P2P networks to promote that capability through their own apps. Visa, too, plans to leverage its brand as well as work with its partners to build consumers awareness.

“Usage and industrywide interoperability will ultimately be driven by awareness. The large user base of our partners, combined with Visa’s trusted brand, will help drive awareness and trial among users,” says Visa’s Newkirk.

‘An Area To Watch’

As of now, Visa+ is expected to begin rolling out some time in 2024. That timeline seems reasonable to payments experts, given Visa’s track record for introducing new products on time. A larger question about the rollout is who will be responsible for building the framework that connects P2P networks to Visa+.

It appears that responsibility will be shared by P2P network partners and Visa. “Visa, DailyPay, and other participating wallets and partners did all the hard work [when it comes to connectivity],” says Dekel Beeri, vice president, payment strategy, for DailyPay.

For its part, Visa says its role in overseeing Visa+ will include connecting endpoints and form factors and enabling interoperability. Part of Visa’s network-of-networks strategy includes using all available networks to initiate a transaction and being a single connection point for its partners.

But what participating networks will pay for transactions that run through Visa+ remains cloudy. Visa declined to share any specifics on network pricing. However, Ryan Dew, senior vice president of global product at i2c, says that while network pricing is not yet finalized, pricing is likely to be akin to that for Visa Direct and other money-movement services already enabled through Visa.

On the consumer side, Beeri says DailyPay does not plan to transfer any new costs to Visa+ users. “We want to provide the best service and provide it whenever and wherever our users need access to their earned wages.” he adds.

One area in which interoperability is likely to boost P2P volume is business-to-consumer disbursements, such as payroll. Enabling disbursements will help fintechs with B2C payments to their customers, according to a TabaPay blog post on the company’s Web site.

“Fintechs like DailyPay, which already send millions of earned-wage transactions to consumers’ bank and card accounts, can expand their reach to participating wallets with a Visa+ payname,” the post says. “Consumers can get funds when they want and where they want, quickly and securely. Visa+ paynames can also provide neo-banks a path to provide enhanced P2P services that increase engagement with their platform.”

Looking at gig workers who get paid daily or per delivery, B2C payments would help them get paid faster and better manage their income stream, according to Hand. “But again, these types of payments must be facilitated in a way that is safe for the consumer,” Hand says.

Growing B2C disbursements through Visa+ will also open the door for Visa to tackle the international space for P2P payments, Grotta adds. “This is an area to watch going forward,” she says.

A Game-Changer

The primary reason Visa is taking the lead on P2P network interoperability, as opposed to the P2P networks themselves, is that interoperability is of the essence of what the company does. “Interoperability has historically been at the core of what Visa does. So, “creating interoperability among closed-loop wallets is right in our wheelhouse,” says Newkirk.

“Visa has the technology and network to reach wallet endpoints around the world and enable money movement between them through consistent operating standards and risk controls,” he continues. “We are flexible and are working on several approaches to meet client needs regarding interoperability.”

If Newkirk’s optimism turns out to be well-founded, Visa+ should perform as expected, and that will be a game-changer in the world of P2P payments. If not, it’s likely some other standard-bearer will step in to forge interoperability among the networks.