Visa Inc. is making inroads into the world of third-party software development, bolstering its ability to compete in e-commerce payments.
The company has poured enough cash into Authorize.Net, a payment gateway popular with smaller merchants that came with its July purchase of CyberSource Corp., to advance its open-source platform at least two years ahead of schedule.
The move puts Visa closer technologically to the likes of PayPal Inc., which launched its PayPal X platform last year, analysts say.
Visa unveiled its latest updates Monday. Some of the improvements include software-development kits that provide ready-made code for developers to use with their own mobile and desktop applications, updated documentation and blogs that offer tips, a redesigned portal on its website, and a new connection method that enables merchants to never have to store or collect any transaction details for security purposes.
This work builds on a platform Authorize.Net built in 2005 and updated last year. The move is the first industry watchers have seen out of Visa’s CyberSource acquisition.
“Now that we have been part of the Visa environment for a couple of months, they are very interested in driving this forward,” says John Bodine, Authorize.Net vice president. “Everybody is trying to cultivate that developer, or third-party solution community; we are talking about an electronic environment that’s doing trillions of dollars in flow a year.”
MasterCard Worldwide has similar ambitions for third-party software developers. The Purchase, N.Y.-based company plans to launch its own open platform this year. American Express Co. discussed intentions along the same lines when it bought Revolution Money in January.
Meantime, Visa’s strategy is to use Authorize.Net as its mouthpiece instead of just simply absorbing the technology.
Today, the platform is agnostic. The roughly 300,000 online merchants that use Authorize.Net can accept any of the payment networks using gateway, and Visa says it is not going to restrict that.
Executives would not specify how much additional funding and personnel Visa has committed to the payment gateway.
Although Visa says it considers PayPal an ally, analysts note that PayPal, a unit of eBay Inc., is also Authorize.Net’s main competitor.
Authorize.Net long has been the underdog, says Beth Robertson, director of payments research at Javelin Strategy and Research in Pleasanton, Calif. Authorize.Net “is actively used by the small, smaller to midsize merchants,” she says. It has been “more product-specific, whereas PayPal X has a broader platform that is less narrowly focused.”
Their rivalry goes back a decade. In the 1990s, Authorize.Net was just as big a player in e-commerce as PayPal, says Brian Riley, a research director for bankcards at TowerGroup. After its sale to eBay, PayPal pulled ahead of Authorize.Net.
“It’s a long way to catch up to PayPal,” Riley says. PayPal “is kind of on its own right now.”
Room To Grow
Still, the more businesses developing the technology, the more opportunity there is.
“Something like this with Visa certainly expands the capability,” Riley says. “It’s a little bit late in the game, but there is plenty of room for growth.”
This growth would come as more merchants explore the opportunities in digital channels. “There is tons and tons of business that is not on the Internet—yet, and not on the electronic payment channels,” Riley says. “It’s a perfect example of a rising tide raises all boats.”
Gerry Sweeney, Visa head of e-commerce, says PayPal and Authorize.Net will complement each other at times.
“PayPal is a complex organization, and there are going to be some parts of the payment system that we are going to partner with them with,” he says. “PayPal drives a lot of volume through the system. … I mean, the fact of the matter is, PayPal has many roles within the payment system.”
Visa’s open platform shows promise, Sweeney says. “We are seeing a blurring of the lines of what is an online transaction versus a mobile transaction versus an unattended kiosk. The opportunity is absolutely there to expand into all of those different channels,” he notes
A PayPal spokesperson declined to comment for this story.