Mobile wallets and digital currencies are providing an increasingly viable alternative to traditional card payments, prompting Visa Inc. to present a new value proposition to merchants.

This strategy led Visa into a pilot with TrialPay, a company it purchased in April.  The companies are testing a system that marries mobile marketing with in-store shopping.  Such a combination resembles the pitch of smaller mobile wallet providers that gather and analyze customer location data and other information for purchases made at the point of sale.

"Building connective tissue across commerce is an important piece of the payment ecosystem," said Mike Lemberger, vice president and head of loyalty, offers and data solutions for global information products at Visa. "Where can Visa help drive consumers to merchants?"

TrialPay works with merchants that are willing to make an offer to cover the cost of a shopper's purchase from other merchant. In the Visa pilot, a consumer who is checking into a flight will receive an offer of 500 miles for shopping at a participating coffee shop within the next week. When the consumer comes into the store to buy coffee, he or she is notified in real time about the bonus.

"There's no point of sale changes for the merchant and it's easy for the consumer to receive the reward," Lemberger said, adding future versions of the marketing and rewards program would take advantage of the point of sale updates that are happening at many merchants as part of the EMV and Near Field Communication (NFC) migrations. TrialPay charges merchant partners a referral fee, which is used toward the "offer" to the consumer.

The pilot is ongoing, and the early merchant participants include quick serve restaurants. The pilot will also involve big-box retailers and other companies to determine which merchant categories are most amenable to the TrialPay model, Lemberger said.

Visa will also track purchases and show the merchant in real time how many consumers are coming into which stores. Visa CEO Charles Scharf recently told investors that the TrialPay pilot is part of an initiative that "changes our dialogue" with merchants by drawing attention to the diverse range of value-added services and technology the network offers in addition to card payments.

Visa is also making other moves to attract merchants, including bolstering its mobile commerce technology, a strategy that is already benefiting for the card network.

"This is all part of a larger journey to add value for merchant relationships," Lemberger said.

Like MasterCard and other traditional payment companies, Visa is under pressure to expand what it can do for merchants, particularly as other entrants aim to offer alternative payment services at a lower cost. For example, Walmart, Target and other mega-merchants created the Merchant Customer Exchange to lower costs and generate data from mobile payments.

"It is clear that merchants today do not find sufficient value in existing card products, hence they created MCX," said Tim Sloane, director of Mercator Advisory Group's prepaid advisory service. "If ever there was an opportunity to launch an alternative payment solution, that time is now for many reasons, from discontent to technology."

MasterCard has been expanding its mobile and other digital services for years, and American Express is also turning to emerging technologies as traditional business lines such as cobranded retail cards become more competitive.

"The payments industry has been looking for ways to use the insights derived from payments transactions to drive other value-added services to consumers and merchants, such as the delivery of targeted offers," said Zilvinas Bareisis, a senior analyst at Celent, adding MasterCard's acquisition of Truaxis and Visa Euorpe's partnership with edo Interactive also feed this trend. 

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