Digital Transactions Authoritative, insightful and timely information for payments professionals
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Visa Inc. announced on Wednesday a digital wallet aimed at increasing its share of transactions in mobile payments, e-commerce, and at the point of sale.
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The digital wallet will store all the payment cards in a consumer’s wallet, including non-Visa branded cards, Jim McCarthy, Visa's head of global products, said during a press conference. Consumers will be able to use the wallet to make mobile commerce and e-commerce purchases and purchases at the physical point-of-sale.
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By enabling the wallet to be used for m-commerce and e-commerce, Visa expects it will be able to increase its volume in these lucrative and fast- growing market segments. Online retail sales totaled $38 billion during the first quarter of 2011, up 12% over the same period a year ago, according to Web-measurement firm comScore Inc. M-commerce sales, excluding travel, were projected to reach $3.4 billion in 2010, up from $1.4 billion in 2009 and $396.3 million in 2008, according to the latest figures from ABI Research. Travel-related mobile purchases were expected add another $1.5 billion in 2010.
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“The days of entering a 16-digit card number, an expiration date, and CVV2 code to make mobile or e-commerce transactions are over,” McCarthy said. “We expect this digital wallet to have an impact in countries where mobile use is high and card usage is low.”
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With the announcement, Visa joins a parade of payments players that have recently chosen to focus on e-wallets, particularly for mobile commerce. Isis, a mobile-payments joint venture formed by three major wireless carriers, recently said it is abandoning plans to form a rival merchant network and will concentrate on an open-system digital wallet. And Visa rival PayPal Inc. took the occasion of Visa’s announcement to underscore its 13-year experience with wallets. “More than 98 million people around the world have already trusted us with their digital wallets,” the company said in a statement.
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Visa’s wallet will be an on-demand application that will reside on a secure VisaNet server. Consumers will launch the application by clicking on a Visa buy button on a merchant’s Web site and then enter their user name and password to access the account they want to fund the purchase. Additional security layers may be added for certain types of purchases, based on the amount of the transaction or the type of item being purchased. Merchants will receive the buyer’s billing and address and contact information along with an authorization code for each transaction, but will not have access to or store any consumer account data.
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“Merchants are moving away from storing cardholder account data as a way to reduce their risk and PCI obligations,” says Jennifer Schulz, head of innovation for Visa.
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Questions arose during the press conference about whether Visa would use near-field communication (NFC) technology, which it has tested in previous digital-wallet trials, to allow the wallet to be used at the physical point of sale. Visa chairman and chief executive Joe Saunders said that if NFC technology were needed to make the wallet work, Visa has the technology, but would need to have merchants deploy more NFC terminals.
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“If Visa is going to rely on NFC technology as they have in the past, all they are doing is building a walled garden that supports their current infrastructure,” says Richard Crone, chief executive of Crone Consulting LLC. “Right now no major merchant supports NFC technology and many are looking to leapfrog it with mobile technology that allows them to control the payment options, much the way Starbucks has done with its mobile application.” Starbucks Coffee Co. has installed a bar-code-reading mobile-payments system in all of its U.S. company-owned stores that allows customers to tap proprietary, prepaid Starbucks accounts to pay.
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Several large U.S. and international banks are working with Visa to develop the wallet, including U.S. Bancorp, PNC Financial Services, Regions Financial, BB&T Corp., Canada's TD Bank, and the U.S. arm of Barclays PLC. Visa did not say whether these banks are supporting the wallet as issuers, acquirers, or both.
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Potential revenue opportunities identified by Visa include fees from third-party application developers looking to stake out a place in the wallet, such as person-to-person payment applications, and fees from merchants for sending consumers real-time messages on their phones.
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“Right now consumers paying with a Visa or other general-purpose cards are anonymous to merchants, and what merchants want to be able to do is contact them,” says Crone.
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Other expansion opportunities include working with providers of proprietary mobile-payment systems. “A lot of closed-loop mobile-payment networks realize they can’t expand without someone like Visa,” said Saunders. “We don’t always initiate these conversations.” Saunders declined to elaborate.
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McCarthy said Visa’s acquisitions of PlaySpan, a virtual goods monetization platform, and fraud-control technology provider CyberSource Corp. could extend the company’s presence in digital and mobile commerce. If Visa begins marketing PlaySpan in the m-commerce and e-commerce space, it is possible the company may become the merchant of record for PlaySpan transactions in some instances, Saunders acknowledged.
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Because PlaySpan is the merchant of record for the digital publishers it services, Visa is the de facto merchant of record because it now owns the company, added Schulz.
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“Not everyone is going to like the idea of Visa as the merchant of record, but changes in the payment landscape are shifting the role of some of the players,” says Todd Ablowitz, president of consultancy Double Diamond Group. “It would certainly be an aggressive move on their part.”
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