“Competition is better for everyone.” – Visa CEO Charlie Scharf
A statement that sounds like exactly what you’d expect to hear from the leader of the largest payments network in the world.
Until you consider the context in which it was said.
Competition, Scharf believes, is what will keep every player in payments – large and small – focused on what’s really important – making payments the enabler for commerce in a variety of new end points.
“Competition drives a better outcome for the end user,” Scharf told Karen Webster during a fireside chat in front of the Innovation Project 2016 audience last month. “It will push everyone to think differently about the value that electronic payments needs to deliver to all stakeholders, including Visa.”
This perspective on competition as the payments ecosystem’s calling card was prompted by Webster’s query to Scharf about how many networks “we really need in payments” – a reference to the many challengers that wish to disrupt the incumbent networks in payments. In answering, Scharf emphasized that Visa doesn’t “live under the belief” that they should handle “all the payments business across the world,” referencing that many networks today serve large markets and do it well.
UnionPay, he says, is but one example of a network that has ambitions to be a global force – and the backing of the Chinese government who would like to see that happen. That’s happening at the same time, of course, that all networks – including Visa – are strategizing about how to get a piece of China’s payments pie and who are working in a variety of ways to effect that.
Scharf and Webster’s thirty-minute exchange that morning came with a refreshing dose of reality from a CEO with a very clear focus on what he believes is needed to accelerate the rate of innovation in payments.
Innovation that is inspired by some rather dramatic changes taking place in and around the payments and commerce ecosystem.
Scharf characterized the sea-change taking place today in payments as “different from anything we’ve seen in a very long time.” Moving from a pure cash/check-based society to electronic payments is one thing, Scharf remarked. But embedding payments in a variety of commerce experiences, is something very different.
Scharf’s view is that the opportunity for commerce to reach its full potential can only happen if transactions become “seamless” – creating the same kind of “better buying” experiences across all of the channels consumers shop – that “the Amazons and Alibabas of the world” have created for consumers online.
“The opportunity to make commerce more seamless — whether a consumer is buying something in a physical store or buying something on a website or a tablet or mobile device, or anything else that operates as part of the connected commerce world we are creating — is something that we get very excited about.” – Visa CEO Charlie Scharf
“The reality is that most commerce transactions are not seamless transactions,” Scharf remarked. “The opportunity to make commerce more seamless — whether a consumer is buying something in a physical store or buying something on a website or a tablet or mobile device, or anything else that operates as part of the connected commerce world we are creating — is something that we get very excited about.”
So how do we get to this seamless and connected commerce world, Webster asked? Over the last five years or even longer, she pointed to the number of “innovations” claiming to move us in the direction of a better payments experience. Yet, mobile wallet usage in the physical store remains nascent – and consumers are still very much glued to their plastic cards. And, at least in the U.S., NFC hasn’t been the “silver bullet” technology that has changed consumer behavior and driven adoption, Webster observed.
“Aside from EMV becoming a catalyst to drive merchant shift to new terminals, not much has happened to change things at the physical point of sale,” she remarked.
That was an observation that Scharf challenged.
Scharf pointed to the “tremendous progress made,” in other parts of the world in that realm. He cited Australia’s payments market, where 75 percent of card-based payments are contactless and the U.K., where contactless payments volume is increasing exponentially. And Africa, where mobile has dominated the physical card in ways that are “unprecedented.”
As for the U.S., Scharf admits that the path to a new commerce experience is more complicated. The U.S. is entrenched in a “way of doing things in the physical world,” that will take longer to change.
“I personally think it’s going to take a long time … not sure if it’s 3, 5, 7 or 10 years. I would love to see it happen more quickly. But again, we’ve got a lot of very expensive infrastructure coupled with the need to demonstrate more value to the end consumer,” Scharf said.
It’s a reality that many share — along with their fair share of ideas for how to insert that value into the payments stream. Sometimes those many “good ideas” inspire the kind of debates that Scharf believes are too “focused on the problem and not the solutions to those problems,” diverting attention away from the real problem to be solved.
“We should be having debates about the next methods of authentication that are possible today — whether it’s geolocation, whether it’s biometrics. How to truly make commerce easier for consumers regardless of the channel they’re shopping, the form factor they’re using or the geography in which they live. The reality is that we’ve got this big, embedded and highly secure infrastructure, motivated banks, and lots of great technology. But [there are] lots of debates over the types of things that miss the bigger picture – and only hold things back,” Scharf said.
So, Webster asked, what is Visa’s role and responsibility in moving the ecosystem forward? As the largest player in the world, as the incumbent – Visa is a target. Yet at the same time, she observed, Visa’s scale and track record for payments and technology innovation puts them in the best position to move the industry and all of its stakeholders forward, faster.
Scharf said that the “debate about Visa’s ability to change the debate” is not his focus.
What is, he said, is using Visa’s assets to quickly accelerate innovation’s path for the benefit of merchants who want more sales and consumers who want an easy and secure way to make a purchase. “Whether it is to more quickly accelerate commerce from offline channels to online channels through things like tokenization or opening up capabilities that we have embedded in our network and all the things we can do with a transaction. Opening up the capabilities of those within the broader ecosystem, the broader merchant community or to the ISVs out there,” Scharf continued, “is where we see us not debating standards, for example, but leading by demonstrating the value we can add to the ecosystem and those within it.”
Some of those efforts are quite visible today, Scharf added.
The launch of Visa’s Developer Platform in early 2016 is about inspiring developers to leverage Visa’s network assets to make payments an easier lift for those developers.
The launch of Visa’s Commerce Network in January of 2016 leverages the TrialPay platform that Visa acquired in 2015. Focused squarely on helping merchants drive incremental sales, the platform can also make it easier for consumers to be notified of an offer that might be of interest to them, and then have that offer immediately applied to her account.
“There’s no doubt that the Visa Commerce Network can help the merchants identify commerce opportunities — and help other merchants,” Scharf told Webster. “Everyone has been talking about merchant-funded rewards for a long time, but it hasn’t gotten much traction because it’s not targeted enough and it’s not seamless. And the Visa’s Commerce Network allows us to do that.”
Webster observed that as the Internet, mobile devices and technology expand the perimeter of the traditional payments ecosystem, the lines between partner and competitor are sometimes blurred – and often quite fluid. She asked Scharf how Visa navigates that dynamic and ever-changing ecosystem.
“We want to move the world to a more frictionless way of conducting commerce. And to companies that can do that at scale and at the level of security and safety that we believe people across the world will demand.”
Scharf was quick to point out that from his standpoint there is no blurring — you’re either a friend or a foe, there’s no middle ground.
“In the world in which we live in today, we need to more clearly define who’s a competitor and who’s a friend,” Scharf said.
Where those lines are drawn for Visa is very straightforward.
“We want to move the world to a more frictionless way of conducting commerce. And to companies that can do that at scale and at the level of security and safety that we believe people across the world will demand,” Scharf explained.
That means partnering with those who want to work with Visa’s key stakeholder — financial institutions — and extending itself beyond being just an issuer-centric network. As Scharf admits, that’s something that has come with its share of challenges as the company has evolved over the past five decades.
“We have had a long relationship with merchants which has had its ups and downs,” Scharf said. “But we’ve got to think about how we can add value to merchants day in and day out. For instance, we’ve been helping issuers reduce fraud for the last 50 years. That’s something we can now turn our attention to and do the very same thing for merchants.”
Coming full circle to where the conversation started, Scharf understands that its future is up to them to define, driven not by the competitive forces that are intensifying in payments but with a clear perspective on what will create a better commerce experience for merchants and consumers.
“If we don’t continue to evolve our network into something that adds value to the experience that an innovator or any third party wants to deliver to an issuer, a merchant or a consumer, then, of course they’ll find something else that will,” Scharf said.
“We understand very, very, well that it’s up to us to define and drive our future.”
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