Christian Louca
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Visa Inc. announced on Wednesday a digital wallet aimed at increasing its share of transactions in mobile payments, e-commerce, and at the point-of-sale.
The digital wallet will store all the payment cards in a consumer’s wallet, including non-Visa branded cards, Jim McCarthy, Visa’s head of global products said during a press conference announcing the product. Consumers will be able to use the wallet to make mobile commerce and e-commerce purchases and purchases at the physical point-of-sale.
By enabling the wallet to be used for m-commerce and e-commerce, Visa expects it will be able to increase its volume in these lucrative and fast- growing market segments. Online retail sales totaled $38 billion during the first quarter of 2011, up 12% over the same period a year ago, according to Web-measurement firm comScore Inc.
M-commerce sales, excluding travel, were projected to reach $3.4 billion in 2010, up from $1.4 billion in 2009 and $396.3 million in 2008, according to the latest figures from ABI Research. Travel-related mobile purchases were expected add another $1.5 billion in 2010.
“The days of entering a 16-digit card number, an expiration date, and CVV2 code to make mobile or e-commerce transactions are over,” McCarthy said during the press conference. “We expect this digital wallet to have an impact in countries where mobile use is high and card usage is low.”
With the announcement, Visa joins a parade of payments players that have recently chosen to focus on e-wallets, particularly for mobile commerce. Isis, a mobile-payments joint venture formed by the major wireless carriers, recently said it isabandoning an ambition to form a rival merchant network in favor of developing a digital wallet. And Visa rival PayPal Inc. took the occasion of the announcement to underscore its 13-year experience with wallets. “More than 98 million people around the world have already trusted us with their digital wallets,” the company said in a statement released on Wednesday.
Consumers can load the Visa wallet, which is expected to become available by fall, onto their phone and select the payment option they want to use by channel, such as their debit card for m-commerce purchases and their credit card for e-commerce purchases. Visa executives, however, did not specifically describe the technology behind the wallet. That vagueness has prompted speculation among payment experts about whether Visa is planning to attach near field communication chips (NFC) to a mobile phone to hold the wallet.
Visa has tested NFC technology in previous digital-wallet trials. Other potential technologies that can be used include applications that can be loaded onto a mobile phone and a cloud-computing-based digital wallet that resides on a remote secure server and can be accessed by the consumer from a Web-enabled smart phone.
Although Visa did not immediately respond to questions from Digital Transactions News, Visa chairman and chief executive Joe Saunders said during the press conference that if NFC technology were needed to make the wallet work, Visa has the technology, but would need to have merchants deploy more NFC terminals.
“If Visa is going to rely on NFC technology as they have in the past, all they are doing is building a walled garden that supports their current infrastructure,” says Richard Crone, chief executive of Crone Consulting, LLC. “Right now no major merchant supports NFC technology and many are looking to leapfrog it with mobile technology that allows them to control the payment options, much the way Starbucks has done with its mobile application.” Starbucks Coffee Co. has installed a bar-code-reading mobile-payments system in all of its U.S. company-owned stores that allows customers to tap proprietary, prepaid Starbucks accounts to pay.
Several large U.S. and international banks are working with Visa to develop the wallet, including US Bancorp, PNC Financial Services, Regions Financial, BB&T Corp, Toronto Dominion’s TD Bank, and the U.S. arm of Barclays PLC. Visa did not say whether these banks are supporting the wallet as issuers, acquirers, or both.
Other potential revenue opportunities identified by Visa include fees from third-party application developers looking to stake out a place in the wallet, such as person-to-person payment applications, and fees from merchants for sending consumers real-time messages on their phones.
“Right now consumers paying with a Visa or other general-purpose cards are anonymous to merchants, and what merchants want to be able to do is contact them,” says Crone.
Other expansion opportunities include working with providers of closed-loop mobile-payment systems. “A lot of closed-loop mobile payment networks realize they can’t expand without someone like Visa,” said Saunders. “We don’t always initiate these conversations.”
Saunders declined to elaborate further on the subject.
McCarthy said Visa’s acquisitions of PlaySpan, a virtual goods monetization platform, and fraud-solutions provider CyberSource Corp. can extend the company’s presence in digital and mobile commerce. If Visa begins marketing PlaySpan in the m-commerce and e-commerce space, it is possible the company may become the merchant of record for PlaySpan transactions in some instances, Saunders acknowledged.
“Not everyone is going to like the idea of Visa as the merchant of record, but changes in the payment landscape are shifting the role of some of the players,” says Todd Ablowitz, president of consultancy Double Diamond Group. “It would certainly be an aggressive move on their part.”
