What Charles Scharf’s Visa years say about his plan for payments at Wells

Wells Fargo has named Charles Scharf to be its next CEO, placing an experienced bank executive at the top of the troubled company.

In the payments world, Scharf is best known as the CEO of Visa Inc. from 2012 to 2016, where his strategies for faster payments, fintech partnerships and other key issues may shed light on what he has planned for Wells Fargo.

This story was compiled from reporting by PaymentsSource writers including John Adams, Kate Fitzgerald, David Heun, Michael Moeser and Daniel Wolfe.

Faster payments

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Visa Inc. debit and credit cards are arranged for a photograph in Washington, D.C., U.S., on Friday, Oct. 20, 2017. Visa is expected to announce fourth-quarter earnings figures on October 25. Photographer: Andrew Harrer/Bloomberg
Visa's faster payments system, Visa Direct, is built on debit rails — and thus not all that dissimilar to Zelle, which is based on ties to a consumer bank account.

"When we think about what faster payments means for us, we know the capabilities that we have and think about how we have positioned ourselves with Visa Direct. We feel good about those capabilities," Scharf said in October 2016 during his last earnings call as Visa's chief executive.

Visa Direct is used by gig economy providers, such as Lyft, which uses it (and Mastercard's Moneysend) to provide instant payments to drivers.

Wells Fargo was one of the founding members of clearXchange, which eventually became the Zelle network. Zelle is already connected to Visa Direct, and is working with The Clearing House to add its Real Time Payments service as an additional payments rail. This could open the door to using Zelle for bill payment and point-of-sale purchasing.

Working with fintechs

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Under Scharf, Visa for the first time opened its network to third-party developers, inviting collaboration with financial institutions, merchants and technology companies through the use of APIs.

"We have always had great talent at Visa, but our success has relied on the partnerships we have been able to develop around the globe," Scharf said during the February 2016 announcement of the Visa Developer platform. "The opportunity to accelerate the growth of commerce is fundamentally different today, and that is what we are doing."

In effect, Visa Developer helps transform the card brand's network into a software-based solution, rather than the "traditional, hardware-based network of the past," Scharf said.

This experience aligns with Wells Fargo's recent moves to open itself to more collaboration with fintechs. In September, Wells Fargo announced a data-sharing agreement with the data aggregator Plaid, which had previously screen-scraped data from Wells accounts.

“The agreement we have signed ... takes the industry one step closer to having a consistent approach to leveraging APIs to connect customers to the apps they want to interact with," said Ben Soccorsy, head of digital payments at Wells Fargo Virtual Channels.


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Pedestrians walk past PayPal Holdings Inc. signage outside the company's headquarters in San Jose, California, U.S., on Tuesday, Jan. 24, 2017. PayPal Holdings Inc. is scheduled to release earnings figures on January 26. Photographer: David Paul Morris/Bloomberg
Both Visa and Wells Fargo have had to come to terms with PayPal.

In July 2016, Visa negotiated a cease-fire with PayPal after tensions between the two companies had escalated to the point Scharf in June of that year warned PayPal of the perils of becoming "frenemies" because of PayPal’s relentless efforts urging consumers to pay via ACH instead of payment cards.

Under that new arrangement, PayPal promised to give Visa issuers equal visibility as funding options, and Visa vowed to provide economic incentives and invited PayPal to join the Visa Digital Enablement Program. Mastercard announced a similar arrangement in September 2016.

Wells Fargo's rivalry with PayPal goes back pretty far — before eBay purchased PayPal, it partnered with Wells Fargo to create a competing product called Billpoint.

Things have come a long way since then. This year, Wells Fargo, PayPal and Discover announced that they are backing an effort to bring venture capital money to fintech startups founded by women.

In the cards

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Visa Inc. and contactless payment logos sit on a debit card in this arranged photograph, in London, U.K., on Friday, May 22, 2015. Credit and debit cards that can be used by tapping the reader are gaining users, and mobile apps are set to further boost the popularity of contactless paying. Photographer: Simon Dawson/Bloomberg
In April, Wells Fargo committed to converting all of its payment cards to contactless technology — citing Visa data in its announcement.

“According to Visa, contactless payments will soon be ubiquitous, with 78 out of the top 100 U.S. merchants (by transactions) currently offering the ability to tap-to-pay at checkout,” Beverly Anderson, head of Wells Fargo cards and retail services, said in a news release.

Visa pushed for the addition of Near Field Communication technology at the point of sale starting in 2012 as part of its Technology Innovation Program. That program was more focused on EMV adoption and the pending liability shift in 2015, but in the process of upgrading terminals Visa urged merchants to add NFC acceptance for mobile wallets and contactless cards.

Blockchain for business

Wells Fargo said in September it will test Wells Fargo Digital Cash, initially to support real-time payment processing and settlement for cross-border uses, such as for corporate clients. That’s likely just a first step, as Wells Fargo suggested much broader use for its first internal blockchain platform.

The bank referenced the "increasing digitization" of banking services globally in announcing Digital Cash, adding distributed ledger technology has promise for a variety of use cases and could remove financial barriers. That's a reference to the friction that accompanies international payments, as well as a nod to financial inclusion that often accompanies digital currency projects.

At Visa, Scharf similarly viewed blockchain as a technology that could help in B2B scenarios — such as through Visa B2B Connect, enabling real-time, high-value international payments between participating banks.

The goal is to use blockchain to "improve something that already exists," Scharf said in October 2016.

Tough decisions

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A woman walks past a Wells Fargo & Co. bank branch in Los Angeles, California, U.S., on Tuesday, July 7, 2015. Wells Fargo & Co. is scheduled to report quarterly earnings on July 14. Photographer: Patrick T. Fallon/Bloomberg
With Wells Fargo still reeling from the fake-accounts scandal of 2016, a reorganization may be in order. Scharf is no stranger to this task.

After reabsorbing Visa Europe in 2016, Visa reportedly laid off between 800 and 1,500 of the 11,000 people it employed worldwide. Scharf credited "cost control discipline" as a factor in growing Visa's profits during the prior quarter.

This process has already begun at Wells Fargo, which in 2018 announced plans to lay off up to 10% of its workforce of 265,000 by 2020.

But with new leadership may also come new opportunities. As of this year, companies like JPMorgan Chase and BNP Paribas have almost reversed all their post-crisis job cuts, according to Bloomberg.