When Visa and PayPal announced a strategic partnership that would see the largest payments network in the world and the largest digital payments network jointly leveraging their considerable individual strengths to accelerate the pace of digital payment innovation and adoption last July, then Visa CEO, Charlie Scharf, said that it was “all about driving growth in the electronic payments universe.”
That universe now includes the Asia-Pacific region.
In a press release issued yesterday (April 4), Visa and PayPal made official something that Visa Group Executive for Asia-Pacific, Chris Clark, said had been in the works almost since the partnership was first announced.
According to him, it will likely be done in the next couple of weeks.
In a conversation with Karen Webster yesterday shortly before the news went public, PayPal’s Head of Global Core Payments, Jim Magats, said this partnership structure is “market specific and takes the goodness of the U.S. deal and the principle of consumer choice and makes it come alive in an exciting and dynamic region of the world.”
The “goodness” of that U.S. deal includes giving Visa cards prominent positioning in the PayPal wallet — extending consumer choice in a way that preserves the issuer’s brand. It also includes access to Visa’s Digital Engagement Platform for tokenization, the enablement of contactless in-store payments and access to Visa Direct for instant deposits.
For the Asia-Pacific region, Magats said that, given its incredibly large and incredibly diverse payments environments, there isn’t a one-size-fits-all Asia-Pacific solution. Initial plans include auto provisioning of Visa products in the PayPal wallet for pan-region issuers and access to VDEP and Visa Direct — something Magats described as the “convenience and security core” of the PayPal-Visa pair-up.
As the partnership evolves, Magats noted that the pair will explore a variety of “in-store” payments methods, including contactless in markets like Australia, where terminals and behaviors support such acceptance, and QR codes in markets like India and Singapore, where merchants can implement low-cost solutions to enable digital payments acceptance. QR codes, if you recall, are a core competency of mobile payments provider Paydiant, which PayPal acquired in March of 2015.
But apart from that, Magats said that the Asia-Pacific expansion is also about using that core as a starting point to build more market-specific services for the myriad developed and developing economies that make up the region.
Building for a Developing Future
Magats told Webster that some of Asia-Pacific’s biggest challenges were also its biggest opportunities: Size of population does not equal number of people who are able to participate fully in the digital commerce ecosystem. That’s what, he said, made the move to Asia-Pacific so appealing — and the pair’s first stop.
“Visa and PayPal both have a number of creative assets that we can use to remove cash from the ecosystem and fully engage that consumer who’s sitting on the sidelines of the digital economy because they don’t today have access to credit cards or debit cards.”
Mobile usage — particularly mobile payments — are accelerating quickly in the region, noted Magats: at about 2-3 times the pace of the United States. But the banking infrastructure that underlies it is an entirely different story: one that reflects something that’s about 2-3 times less advanced than what is a standard offer in the U.S.
So even though there are some very familiarly developed economies with very well established card-based consumers — Australia most notably — you also have economies like India, where there are 420 million people without any form of a bank account; super modern centers like Hong Kong, where only 70 percent of the population owns credit or debit cards and Japan, where most people still use cash.
“If you take PayPal mobile checkout and security and combine that with Visa’s global network and issuing bank footprint, we can co-create the digital wallet experiences these financial institutions want but struggle to deliver,” Magats told Webster.
PayPal, Magats notes, gets access to a new set of potential users in a region that they can more fully serve.
“In Asia, we have been more [of a] net exporter — with more people selling into us than buying. We think this partnership could drive a lot of consumers into our ecosystem … many [of whom] have not been as familiar with PayPal, but who we will be able to access more frequently as we partner with banks to be their digital channel of choice. This is really a chance to pursue scale at a whole new level.”
Building a New Level
A lot of money — in the U.S. and around the world — has been spent “chasing mobile wallets,” a notion that PayPal and Visa now think isn’t really the relevant storyline anymore. Instead, Magats said, their partnership will create access to a worldwide digital payments network that is issuer-centric, wide-ranging, easy to use, standardized, interoperable — and inoculated against fraud.
It’s a suitable hedge for issuers in the region who are feeling the pressure from domestic mobile wallet providers that look to disintermediate rather than partner with them. PayPal and Visa together, Magats said, is the perfect digital one-two punch — offering a digital distribution network that issuers can literally turn on and scale up very quickly.