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Emerging Payments

Visa Sets Its Sights On Mobile Payments, E-Commerce And Funds Transfers

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Continuing its expansion into newer payments-related territory, Visa Inc. intends to focus on increasing its presence in mobile payments, online commerce and funds transfers, Joseph W. Saunders told analysts during a conference call to discuss fiscal first-quarter earnings.

But as the company expands into those areas, “its presence is still relatively small in the grand scheme of things,” contends Gregory Smith, managing director of Memphis-based Duncan Williams Inc. “Debit and credit cards are still the bread-and-butter of its company.”

Visa, however, is “planting the seeds” in trying to develop products to take advantage of its cards through different markets, Smith says. In terms of mobile payments, however, it may be a while before U.S. consumers become a significant part of Visa’s business, he notes.

Visa supports 23 mobile-payments programs in 19 countries, Saunders noted during the Feb. 2 call, adding that Visa expects international markets to adopt the payments option quickly.

In the U.S., the company is working to promote mobile payments by introducing mobile contactless-payment options and location-based technology.

In conjunction with several banks that include Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and U.S. Bancorp, Visa is testing mobile payments to enable consumers to pay for purchases at U.S.-based retailers that accept contactless payment, Saunders explained.

BofA last year was the first to announce it plans and is testing the system using a mobile-wallet application that can store up to one of the bank’s credit cards and one debit card (see story).

Visa in December also launched a mobile-shopping application for Apple Inc.’s iPhone to enable Visa cardholders to access various merchant discounts not available to other consumers using their mobile phones (see story).

Visa’s foray into online commerce is not new; many consumers using PayPal often pay with a Visa card, Smith says. But Visa still sees the e-commerce industry as an important revenue-builder for its business.

“Growing our e-commerce business remains a top priority for Visa and will be an area of emphasis in 2011,” Saunders said. In fact, Visa saw a 25% increase in online-payment volume globally during the quarter compared with the same period a year earlier, he noted.

Visa’s July purchase of CyberSource Corp. has helped the card company increase its growth in the e-commerce market by delivering payment-security and fraud-management services to merchants, consumers and other partners, Saunders said.

CyberSource reported a 39.6% increase in billable online transactions for the fiscal first quarter ended Dec. 31, to $987 million from $707 million during the same time last year, according to Visa’s fiscal first-quarter earnings.

Visa announced its proposal to buy CyberSource in April and since then has worked to advance its open-source platform through Authorize.Net, a payment gateway that came with the acquisition of CyberSource (see story).

Within the funds-transfer market, Visa recently expanded its partnership with MoneyGram International Inc. U.S. consumers now may visit any MoneyGram location and send funds directly to any Visa credit, debit or prepaid account in Mexico, Saunders explained (see story).

Visa may be working to push its way into the fund-transfer market, but is faced with the challenge that the vast majority of funds transfers are still cash to cash, Duncan Williams’ Smith says.

Moreover, Visa cardholders are limited to who they can transfer funds to because only Visa cardholders may receive the transfers, Smith says. Visa and other card companies only look at funds-transfer services from the “scope of its specific brand, while they should look at it holistically,” he adds.

As a company, Visa on Feb. 2 reported net income of $884 million for the fiscal first quarter ended Dec. 31, up 15.9% from $763 million a year earlier (see story).

 

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