Visa Recasts Digital Wallet Landscape at Intersection of Identity and Payments

Throughout history, the number seven has held significant importance. There are seven days of the week, seven colors in a rainbow, the “lucky sevens” when playing the slots, and it is the number of things that experts say people can easily remember.

It’s also the number of new consumer payments products introduced by Visa today (May 15), designed to make the issuer’s mobile banking app the center of digital commerce for their customers. The cornerstone of these seven new products — and their strategic intent — is to integrate identity with payments to create a seamless and secure digital payment experience for consumers, merchants and banks. The essence of the announcement centers around tokenized credentials issued by a bank. These seven products will give issuers an opportunity to turn their mobile banking apps into their own branded mobile wallet.

Mark Nelsen, senior vice president and global head of consumer payments at Visa, told PYMNTS’ CEO Karen Webster that today’s announcement represents the culmination of a 10-year effort to create what is essentially a secure digital commerce passport that will unlock new experiences both online and offline for issuers, consumers and merchants anywhere Visa is accepted. The potential to shift the digital wallet dynamic is also not lost on Visa and Nelsen, who agree that using the mobile banking app as the centerpiece for provisioning these new digital products gives them a new value-added consumer use case.

“It’s about consumer choice and merchant choice,” Nelsen told Webster. “We’re starting to get away from [consumers and merchants] picking one way to pay because that’s just not going to be the reality throughout the world. For merchants, however, you want to be paid and how you want to receive money, we’re going to support you. Same with consumers. However they want to initiate a payment, we’ve got the technology to enable that as well. The underlying principle is choice.”

First Up: Passkeys

As Nelsen explained, perhaps the product introduction that will have the biggest implication for consumers is the introduction of Visa Payment Passkey Service, which confirms a consumer’s identity and authorizes online payments with a facial or fingerprint scan. When shopping online, passkeys replace the need for passwords or one-time codes, enabling more streamlined, secure transactions.

Nelsen says consumers can expect a smoother online shopping experience with Passkeys, with transactions processed without identity confirmation calls from their banks. Obtaining them will be straightforward through their issuer’s mobile banking apps. When prompted by their bank, consumers can create a passkey for easier online payments. A private key is generated and stored on the consumer’s device upon consent. This key then creates a digital signature for transactions, ensuring the bank can verify the user’s identity.

Passkeys’ first deployment will be into Click to Pay, a service offered primarily outside the U.S., which provides a digital credential linked to the consumer’s device. When making a purchase, merchants can request a digital credential from Visa, which verifies the device information and issues a payment token. From the consumer’s perspective, the process involves clicking the “buy now” button, undergoing a brief facial scan and having their payment cards appear at checkout. Consumers then select their preferred payment card.

“We’ve all had times when you try to buy something and it doesn’t go through and you have to call your bank and they tell you there’s something suspicious about the transaction,” Nelsen told Webster. “With Passkeys, if you do the facial scan immediately upfront, you can do that real quick check. That means all these transactions will go through seamlessly and you no longer have to confirm your identity after the fact.”

One Card, Many Ways to Pay

Ten years ago, the notion of using one card to access multiple forms of payment was all about a battery-powered plastic card with little buttons representing different payments choices. Fast forward a decade, and Visa’s digital version of the one card to pay any way will allow a single card to toggle between payment methods, whether it’s debit, credit, buy now pay later or other installment plans. Flexible Credentials are currently live in Asia and will launch with BNPL provider Affirm later this summer in the U.S.

Participating banks will issue the digital card and then offer consumers the choice to set preferences, such as paying with a debit card for transactions under $100 in real-time and using a credit line for amounts over $100 within the mobile banking app. This flexibility can be configured for a single payment credential through the mobile banking app, provided the issuer participates and removes the friction of using multiple cards for different purposes, enabling them to customize how they pay based on transaction amounts.

Issuers will have several options for managing payment rules and preferences for Flexible Credentials. They can either handle the configuration preferences internally or utilize a service provided by Visa, which offers APIs to set up these controls. These APIs can direct Visa to switch transactions to the appropriate funding source based on predefined rules.

“For the consumer Flexible Credentials can work with any type of funding source the bank would offer you,” Nelsen said. “Buy now, pay later would be one. Pay with cryptocurrency and paying with points would be two others. Whatever that banking institution will allow, the consumer would then have the option to choose the type of transaction and how they want it to be funded.”

More Tapping with Cards

At the end of 2023, Visa’s Tap to Pay service had a 65% reach globally, up two times the amount in 2019. Visa’s Tap to Everything capabilities will use a card to authenticate identity for online shopping by tapping their card against their mobile device, eliminating the need for manual entry.

Tap to Everything will also support tap-to-authenticate, tap-to-provision a card, and tap-to-peer-to-peer (P2P) payments, which is a new use case that initiates a P2P payment by entering the receiver details and tapping their card against their phone to authenticate and initiate the transfer to any receiver regardless of whether they are a Visa accountholder.

Pay By Bank

Building on its acquisition of EU-based FinTech Tink in March of 2022, Visa will bring pay-by-bank features to the U.S. by allowing consumers to directly link their bank accounts to make what would otherwise be an ACH bill payment. Nelsen said that Pay By Bank simplifies the setup process for consumers and makes it possible for billers to send a “pay by bank” link for automatic monthly payments,

“It also has advantages for the biller, because they maintain their relationship with the consumer,” Nelsen said. “If for some reason the consumer needs more time, let’s say they’re late getting paid, or if they changed jobs and their pay date comes a little bit later in the month, they can ask the biller [to shift the due date] It provides a nice channel of communication between the consumer and the biller in a way that really doesn’t exist easily today.”

Payment economics remain largely the same, Nelsen said, largely because Visa’s Pay by Bank solution eliminates the costs billers pay when they use bill pay rails.

Fighting Push Payments Fraud

Push payments fraud using faster payments rails has become a big topic of conversation worldwide. Although the sender authorizes these payments, the receiver may be a fraudster. Once sent,  the funds are irretrievable. Nelsen told Webster that banks running transactions over faster payents rails may be challenged to recognize many fraudulent transactions simply because there isn’t enough volume to have a true picture of who those fraudulent endpoints might be.

The expansion of Visa Protect to account-to-account payments is a new data set that enriches real-time rail transactions with Visa consumer payments data to help flag fraudsters and protect issuers and consumers.  Nelsen described it as one more set of eyes that helps the banks determine whether the transaction is legitimate.

“Rather than building a model that’s based just on the RTP data, we look at the bank account, the ACH/RTP transaction set, and then for the debit card, what are the associated debit card transactions that also occur?” Nelsen said. “And you combine both assets to provide better risk intelligence for the issuer. They will have more confidence as well in terms of ‘should I initiate this transfer of money?’ “

Data Tokens for Consumers

Today, 29% of all transactions processed by Visa are tokenized. Consumers can now use them. Doing so could put an end to irrelevant offers and the unfettered use of consumer data by third parties for marketing purposes.

Nelsen said that Visa’s data tokens give consumers the power and the tools to control who has access to their payment data and when they may want to revoke those privileges. “A lot of issuers provide offers when you log into the app,” he said. “We can help the issuers also now have  a much more relevant set of offers that could be provided to their consumer.”

The idea is to establish a permissioned consent from consumers for more personalized offers driven by AI and transaction data. Integration with the bank happens when Visa passes the token back to the bank to capture where the data has been shared.

The Power of Seven

Nelsen emphasized that the new products and services are built for the entire payments ecosystem but give issuers new capabilities to turn their mobile banking apps into digital payments and commerce focal points. Yet with the competitive authority to now play more fully in the digital wallet ecosystem, Nelsen said that consumers will also expect more from their banks. He believes the seven products Visa is launching today will give them a strong foundation upon which to innovate the consumer experience.

It is something Nelsen also believes will be essential, as AI-powered tokens will, at some point in the not too distant future, make the choice of card products and payments types automatic and invisible.

“It will be an interesting challenge for the banks,” he said. “Some of the banks will thrive and do really well. And some may suffer. Consumers will then start to prefer those issuers who have the better experience, who provide the better conversion rate or provide the better click-through rates. We’ll have to do is work closely with the issuers to make sure they’re not falling behind.”