The last decade of payments innovation has developed new normals for senders and receivers of money that could not have been achieved — let alone imagined — 10 years ago: the rise of faster and real-time payments, the development of new technologies to ease cross-border transactions and the deployment of new business models that introduce previously unseen use cases for payment solutions to tap.
It was in a convergence of these trends that Visa launched its real-time payments solution, Visa Direct, a technology enabling push payments onto recipients' Visa cards. The tech wields the payments technology firm's global reach and prolific partnership network, built to enable outgoing payments from card products, and Visa uses it to enable incoming payments to those same cards.
In a recent conversation with Karen Webster, Bill Sheley, global head of push payments for Visa, took a look at Visa's journey of expansion throughout the payments supply chain, and mused over the most disruptive payment trends of the decade that are now providing opportunities for Visa Direct to tap into new, unforeseen use cases for the next decade of innovation.
The Network Opportunity
Sheley explained that Visa's efforts to expand throughout the money supply chain have historically stemmed from its services that enable cardholders to make payments. However, there is opportunity in money flowing the other direction, too, he noted, with that capability taking advantage of Visa's global network of consumers, small businesses, financial institutions and strategic partners.
"We've taken that network and [thrown] it in reverse so we could move money in the other direction," he said. "We spent a lot of time fortifying that distribution, getting all of those card endpoints — which are connected to stores and value — with the ability to receive deposits in real time."
In Visa's efforts to cover "99 percent-plus of banks, consumers and small businesses," Sheley said, those partnerships will continue to be an important piece of Visa Direct's adoption efforts. After all, if there aren't users to accept payment, then payment senders will have no incentive to use the tech. Deploying Visa's existing user network means the capability for clients to accept payments is already built into the solution.
The most recent collaboration, announced earlier this month, sees cross-border payments technology company TransferWise offering its own customers the ability to initiate payments via Visa Direct. The solution has already been deployed by other partners in the ecosystem, including PayPal, Venmo, Square, Ingo Money and NovoPayment.
According to Sheley, there are three principles underpinning Visa Direct: "reach, trust and operating scale."
Unsurprisingly, this distribution model largely focuses on the massive opportunity in real-time peer-to-peer (P2P) transactions. However, those principles — reach, trust and operating scale — are now key requirements for payment senders, recipients and facilitators in use cases well beyond P2P.
Emerging And Unexpected Use Cases
For the 2019 fiscal year, there have been approximately 2 billion transactions facilitated via Visa Direct. While P2P payments are a significant part of that volume, Visa told PYMNTS that there are more than 30 use cases to which the solution has been applied.
Use cases often vary by geography, with credit card bill payment a popular application in India, and real-time P2P payments a main driver of traction in the U.S. — a market in which the gig economy explosion has transformed the way professionals want to receive compensation for their work, and the way businesses want to send those payments. The evolution of the gig economy has shed light on the ability for payments to be a competitive differentiator for many of these technology platforms, Sheley explained.
"Fast payments is at the forefront of how you recruit and retain drivers," he said of the opportunity for solutions like Visa Direct in the ridesharing and food delivery markets. "This cash-flow revolution has [created] a whole new workforce approach to the gig economy and sharing economy. It creates a dynamic that has driven these types of payment solutions."
Cross-border payments is another particularly strong opportunity, as major money transfer operators (MTOs) like TransferWise and MoneyGram adopt Visa Direct. Sheley noted that Visa will continue its strategy of expanding its connection points within the global money supply chain to tap into a market opportunity worth $1 trillion annually: Today, Visa Direct has seen transactions initiated across 90 countries, and sent to 170 countries, as it positions itself to tackle a variety of friction points in global payments.
"Domestically, you may have at least a little bit of commonality," said Sheley. "But when a patchwork of multiple domestic schemes suddenly emerges, your back office becomes bigger than your front office, and it can be pretty daunting."
Visa's existing global network can enable payment senders to mitigate the friction of the traditional correspondent banking network, while retaining a competitive advantage of enabling real-time push payments to recipients, he explained.
There are also significant opportunities in the business-to-business (B2B), business-to-consumer (B2C) and government-to-business (G2B) arenas, with Visa Direct having already been utilized for such use cases as tax returns, insurance disbursements and loan distributions.
According to Sheley, more use cases are emerging all the time, with many new applications likely to arise in the year and decade ahead that cannot be predicted. For emerging payment solutions that launch in the market today, the ability to anticipate market trends will be critical. Yet, perhaps even more important will be the capability of these technologies to remain flexible, and respond to the use cases of the future.