VISA

Visa On Tap To Pay, Cash Displacement And B2B Payments

contactless payments tap to pay

At its investor day presentation Tuesday (Feb. 11), Visa executives laid out a roadmap to displacing cash and checks across the global stage, digitizing payments through click to pay, tap to pay, digital wallets and cross-border flows – along with capturing a sizable slice of B2B spend, too.

Visa President Ryan McInerney said that beyond the core card business there remains the opportunity to “capture new flows of money using our expanding network of networks.”  He said during a strategic overview on accelerating global growth that in capturing new payment flows using the company’s “network of network” effects targets a $185 trillion opportunity.

B2B Potential

Of that tally, $120 trillion is B2B, which he said “includes spending that can be addressed through card-based solutions, accounts receivables and payables flows, as well as cross border.” Another $5 trillion comes from merchant settlement, marketplace payouts and alternative lending. B2C, he noted, is $30 trillion, with opportunities in insurance payouts, on-demand payroll, and gig economy payroll and spending.

Peer-to-peer (P2P), he said, is about $20 trillion, and encompasses remittances. McInerney also pointed to government to consumer (G2C), which is a “more nascent” market, with presence in government benefits and tax refunds.

In a further expansion on B2B opportunities and new payment flows, Chief Financial Officer Vasant Prabhu said that the recent acquisition of Plaid will accelerate new flows, in part by integrating payments with Plaid’s current suite of connected services and making account authentication faster.

He said that the $120 trillion B2B market, as measured in payments volume, is tied to lower velocity but higher value flows. Breaking down the $120 trillion another way, $20 trillion is card-based spend, $10 trillion is cross border (served by Visa’s B2B Connect), and domestic accounts receivable/payable spend equates to $90 trillion.

The addressable revenue opportunities, he said (and as noted on company materials) remain concentrated in card-based solutions and cross-border payments for large enterprises, equating to between $70 billion to $100 billion.

And, in addition, said the CFO, “Visa Direct powers the $65 trillion money movement ecosystem for lower volume, high velocity flows … from any endpoint to any endpoint.”  And, he emphasized that “Visa Direct is not a product, like credit or debit. It is a platform.” Visa Direct, he said, has 130 million active users across two billion transactions, with 250 program partners.

The Consumer

Other, Individual presentations (with just three of the main markets noted below) delved into the market specific opportunities by region and country, detailing total addressable markets that stretch into the trillions of dollars.

Oliver Jenkyn, executive president and regional vice president for North America, said that in North America, despite that the market is relatively mature compared to international outlets, there still remains a long runway for growth.

“The truth is that we are just getting started with the electronification of payments in North America,” he said.

He noted that Visa has about one billion cards in North America at present, with the opportunity to more than double the number of payment credentials in use to more than one billion, through embedding them in digital wallets and IoT offerings tied to cars and electronics and appliances.

There are 10 million merchant locations with Visa acceptance, but there are an additional 10 million more untapped merchants. And Jenkyn said that with $4 trillion in payments volume today there is still another $4 trillion in consumer cash and check conversion potential to be captured.

“This does not include new payment flow opportunities,” he said.

He said that growth in new acceptance is a top priority, and encompass rent, tuition, sports wagering and unattended retail and mobility (such as with scooters).  Materials provided by the company, illustrating market size, show rent as a $570 billion opportunity, tuition at $350 billion, and unattended retail at $50 billion.

Tap to Pay is gaining ground in mass transit, and the executive said it helps build “consumer habituation for tap to pay more broadly. He said that “for in-store payments tap to pay is the best experience,” and stated that for in-store payments, tap to pay provides the best experience. However, cash use remains prevalent and that in North America the average American still makes more than 12 cash transactions per month. More than 55 percent of transactions under $10 are made with cash.

“There is still a ton of cash to displace in the U.S.,” he said.

Tap to pay shows that through its ease of use, consumers use the function more often. Globally the firm has seen a 20 percent lift in transactions following the debut in mature markets of tap to pay. In the U.S. so far, said Jenkyn, “we’ve seen a lift … of four-plus transactions” per month, equating to a lift of more than $160 per month.

Drilling down a bit further into tap to pay metrics, the company has 145 million tap to pay cards in the U.S., he said, with 300 million of those cards to have been issued by year’s end.

He added that 17 of the top 25 issuers in the U.S. will issue tap to pay cards. On the merchant side of the equation, eight of the top 10 merchants are accepting the cards, and 69 percent of all transactions are taking place “tap to pay merchants.”

“All of this is to say, the cards are ready, the merchants are ready, and now we are focused on building the consumer habituation,” he said.

Delving into click to pay, half of online purchases (through guest checkout) present consumers with what Jenkyn said equated to “daunting” experiences.

To make a payment at guest checkout, he said there can be as many as 23 steps throughout the process. Through click to pay the steps can be winnowed down to two steps.

“The new click to pay button is very straightforward,” he said, through clicking on the button and selecting the card desired for payment.

Asia Pacific

Chris Clark, executive vice president and regional president for Asia Pacific, said that cash and check are 48 percent of personal consumption expenditure (PCE) and that equates to $6 trillion. He said that there are 20 million acceptance locations across the region, with 970 million cards issued – and with $1.9 trillion in payments volume. There remains the potential to bring services and products to more than 768 million unbanked individuals.

Of the unbanked population, he said “that’s one-quarter of all adults in the region.”  There are 100 million in untapped merchants today, dominated by India, China and Japan.

Acceptance in the region continues to scale rapidly, as the company pays more than doubled its acceptance points over the past three years.

Tap to pay penetration is 41 percent in the region, he said, up from 29 percent in 2016.

He spotlighted partnerships with digital wallet firms in the region such as Paytm in India, Toss in South Korea and others. Cumulatively these more than 20 wallet partners have more than 1 billion users and more than 65 million merchants in terms of scale.

With a nod toward India, he said that the nation represents a $1 trillion opportunity. In the wake of demonization, transactions have been growing at a 19 percent CAGR. FinTechs remain instrumental to Visa’s growth, he said, in electronic payments.

Also, “credit remains a huge, untapped opportunity,” he said, with 50 million credit cards compared to 800 million debit cards.  Opportunities exist especially in installment loans, he said.

During a part of the presentation devoted to China, Clark took note of the “very strong and growing cross-border business” in the region.  The overall opportunity here is $2 trillion, he said as the company pursues its domestic license application, and the company has been growing its acceptance points in the country, up more than 18-fold since 2016.  He said that part partnering with wallet providers such as Alipay and WeChat Pay will spur more than 50 million QR merchant locations to accept inbound Visa credentials.

 Europe

Charlotte Hogg, CEO of the firm’s European operations, said that the region has four of the world’s top economies, including Germany, Italy, France and the UK. Across the region, there are 560 million cards and the cash and check displacement opportunity is $3 trillion.

“However, the adoption of cashless payments varies across Europe,” she said. The Nordics have cashless payments accounting for 99 percent of all payments, and in Germany, France and Italy, cash payments are still prevalent.

There remains the opportunity to increase acceptance by 10 million merchants across Europe, she said. Neobank customers are expected to reach 85 million across Europe by 2023, she said, at about 20 percent of the population.

Later during the presentation said that the company is making progress with FinTech focused effort, with 46 FinTech deals signed and 84 active partnership discussions in the pipeline across Europe.

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