As payments providers ramp up fast-payment capabilities that don’t depend on existing card-payment rails, pressure has mounted on the dominant U.S. card networks to enable quick transfers from senders to accounts held by receivers worldwide. Visa Inc. on Tuesday, for example, announced Visa Direct Payouts, which allows users to send money overseas either to a recipient’s Visa debit or prepaid card or to his or her bank account. The transfers can be made to more than 170 countries.
Built on the company’s VisaNet infrastructure and its 2019 acquisition of cross-border payments specialist Earthport PLC, the service represents an expansion of the existing Visa Direct capability, which enables real-time card-to-card transfers. Domestic transfers under Visa Direct Payouts do not include payouts to bank accounts. Visa defines real time in this context as “moments or hours” compared to days or as much as a week.
Visa Direct Payouts is also a recognition by the card network that fast payments directly to receivers’ financial accounts have become a competitive market as non-card real-time networks develop. Two major examples, indeed, have emerged in the U.S. market. The Clearing House Payments Co. LLC has offered a real-time transfer service for banks since 2017 and the Federal Reserve expects its FedNow real-time service to begin operating in 2023. “As digital commerce accelerates, Visa is innovating to give financial institutions, governments, individuals and businesses new ways to pay and get paid beyond the card,” said Bill Sheley, a senior vice president at Visa and global head for Visa Direct, in a statement.
Sheley calls the new service a “significant expansion” of Visa’s account-to-account transfer capabilities, with 2 million bank accounts added through the new capability. Visa says Visa Direct now reaches 5 billion cards and accounts in more than 200 geographies and accepts 160 currencies. Systems involved include 16 card-based networks, 65 domestic automated clearing house networks, seven real-time payment networks, and five payment gateways, the company says.
The new service relies on Visa Direct Payout APIs, or application programming interfaces, to reduce the complexity of global payouts to one connection to VisaNet, the company says. The service also embraces financial institutions, remittance providers, and fintechs globally to enable the transfers. An early adopter is MoneyGram, which is adopting the service for cross-border transactions.
Historically, Visa Direct has enabled fast funds transfers to users’ cards. Now, observers are struck by what they see as Visa’s openness to relying on a variety of payments systems around the world for a broader offering. An “important aspect of this announcement is the fact that Visa is including non-card based rails such as real-time payment networks, [automated clearing house] networks, and gateways as it move towards a business model that is less card-centric,” notes Sarah Grotta, director of the debit and alternative products advisory service at Mercator Advisory Group, Marlborough, Mass.
Mastercard offers a competing push-payments service called Mastercard Send. Both services originated as networks by which cardholders could be refunded when making merchandise returns via a technique called the original credit transaction.