Ninety percent of the $10 trillion “push” payments market opportunity is concentrated in a variety of disbursements made between businesses and consumers that today rely on cash, checks and ACH to move money between those parties.
Insurance payments, healthcare reimbursement, merchant settlements, loan disbursements, and payments to workers participating in the shared economy represent a $9 trillion opportunity filled with friction for both the sender and the receiver, with the remaining $1 trillion represented by the more “traditional” P2P payments use cases.
Visa announced today that it has expanded the reach of its Visa Direct platform to include more financial institutions, developers and partners – all in an effort to provide them with access to its real-time rails so that they can, in turn, offer real-time and ubiquitous P2P payments and funds disbursements to their customers.
These partners with programs already up and running include Fiserv and its Popmoney P2P service, Ingo Money and Square. Early Warning’s clearXchange network will now enable P2P payments between the more than 200 million Visa debit cards in the U.S., including payments to non-Visa branded debit cards as well. PayPal and Venmo will leverage the Visa Direct network to enable real time funds transfers, as well – a capability that was first announced on July 21 when details of the Visa/PayPal partnership were disclosed.
In all cases, funds can be transferred directly into the customer’s bank account linked to a debit card, which can be seen as both more secure and convenient in the eyes of the consumer. Real-time authentication also enables the sender as well as the receiver to instantly validate the status of the payment.
Cecilia Frew, SVP of Visa Direct U.S., told Karen Webster that Visa’s goal is to remove the friction associated with a variety of P2P and B2P use cases to improve the speed, convenience and security of sending and receiving payments. P2P, while important, is only the tip of that very large $10 trillion funds disbursement iceberg.
“There are a handful of use cases that are surfacing now because the value proposition is so clear,” she explained.
Use cases for funds disbursements include insurance claims payments, contractor payments, tax refunds and many other forms of business payment services – including merchant services where real-time deposit of sales proceeds is viewed as a critical component of day-to-day operations.
In particular, Frew emphasized, the heavy concentration of checks in the insurance and healthcare disbursements market create a huge expense for companies and a hassle for the consumers who either have to give up ACH and other bank details to get an ACH deposit or have to go through the process of depositing those checks to their accounts.
Frew also sees a growing interest in the use of Visa Direct in support of shared economy platforms such as Uber, Lyft, Airbnb, and Task Rabbit, who today use ACH payments to disburse funds to their contractors. That process typically requires workers to wait several days to get access to their money.
Now, she says, using Visa Direct can enable those platforms to get money into the bank accounts of their workforce instantly, regardless of where they bank, via their debit account.
Frew said that it will be up to the FIs and merchants to decide whether access to funds in real time will be free to the receiver. Frew speculates that there may be situations in which receivers may be more than willing to pay a fee to get access to funds immediately, in exchange for the certainty of knowing that the funds are in their bank account.
Visa’s announcement underscores its focus on removing the real frictions that prevent people, businesses and governments from moving money to each other in an efficient, secure and ubiquitous fashion. Today’s announcement and the capabilities it brings allows Visa’s partners to focus on creating products and solutions that ride on top of the existing network, rather than rebuilding and paying for an entirely new payments infrastructure to support what the Visa Direct platform enables today.
With that infrastructure in place, Frew said, partners and developers are able to focus on the things that will make the funds transfer experience even more valuable, citing the user experience, which is now of great importance given the use of the mobile channel.