Visa jumps into crowded Canadian B2C payments market

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Visa Canada plans to offer real-time B2B and B2C disbursements via its Visa Direct card-to-card transfer service, competing head-on with Canada's Interac network and a product Mastercard launched in the country earlier this year.

Visa has offered Visa Direct for five years in Canada, but previously only allowed P2P transfers using the service. It is now exploring use cases for B2B and B2C transfers via Visa Direct. This lets it tap into the lucrative gig economy, where companies such as Uber and Lyft rely on the immediacy of debit push payments.

Visa's move shortly follows that of Mastercard Canada, which partnered with Toronto-based Dream Payments to offer insurance claim refunds via Mastercard Send push payments. According to an Insurance Bureau of Canada report, the Canadian insurance industry pays out around C$30 billion in claims a year, mostly via check. This partnership will allow insurers to digitize and automate claims disbursements direct to their customers’ debit cards.

Both card brands are targeting use cases presently served by Interac e-Transfer, a P2P and B2B payment and bulk disbursement service offered by Canada's Interac domestic debit scheme. In 2017, consumers and businesses performed 241 million Interac e-Transfer transactions worth C$92 billion, up 52 percent in volume and 44 percent in value over 2016. Around a sixth of all Interac e-Transfer transactions are conducted by businesses.

“Disbursement is a C$1 trillion opportunity in Canada for Visa Direct, as there’s still reliance on slow payment methods, and we’re looking to change that,” said Brian Weiner, vice president and head of product at Visa Canada. “We’re focused on many different verticals where payments could be pushed to consumers’ Visa cards.”

Visa already has some results to show for its efforts. Vancouver-based prepaid program manager Peoples Payment Solutions and Telus Health and Payment Solutions, a subsidiary of top-three Canadian telco Telus, are the first companies named as partners for Visa Direct’s Canadian expansion.

Peoples Payment Solutions and Telus Health's Health Benefits Management platform will enable real-time push payments directly to customers’ Visa debit cards. This will enable patients who submit benefits claims from health care professionals to be reimbursed instantly versus waiting several days for payout.

Peoples says it will offer the Visa Direct solution via a set of APIs to fintechs, SMEs and enterprise customers, working in conjunction with partners such as Visa and Telus Health.

Weiner says that Visa’s objective is to use Visa Direct to improve the user experience and speed of payments via different types of channels.

“Canadian consumers like control over their finances and the idea of receiving a refund, a rebate or a reward in real time direct to their bank account via Visa Direct would be attractive,” he says.

In the U.S., Lyft uses Visa Direct to send payments to its drivers. “This is potentially a big vertical in Canada for Visa Direct,” Weiner says. “We envisage a large number of potential use cases around the gig economy for our platform. For example, a Lyft driver or a rental property owner could get paid in real time via Visa Direct instead of waiting several days to get paid via conventional methods.”

Top Canadian debit card issuers in Canada such as TD, Scotiabank and CIBC enable their customers to have funds paid to their bank accounts in real time using Visa Direct.

Out of the top six Canadian banks, only two — BMO and National Bank of Canada — issue debit cards that are affiliated with Mastercard. RBC, Canada’s biggest bank, is a Visa debit issuer.

“Ninety-three percent of Canadian Visa Debit cards are enabled for Visa Direct and for receiving funds via real-time rails,” said Weiner. “Cross-border payments via Visa Direct are available already in the Canadian market and we’re definitely interested in expanding this feature.”

Visa Canada has partnered with PayPal Canada to make it easier for Canadian Visa cardholders to load funds to their PayPal wallets and to add their Visa cards to their PayPal wallets using banking apps. PayPal and Visa have entered into similar partnerships in other markets in Asia, Europe and the U.S.

“Our partnership with PayPal will improve the consumer experience for Visa cardholders who choose to transact with PayPal, and will create new options for them to transfer funds in and out of their PayPal account from and to their bank account in real time,” says Weiner. “It also enables PayPal to take advantage of the Visa Token Service to enable PayPal usage at the physical point-of-sale when PayPal chooses to introduce this in Canada. The transaction experience would likely be similar to what Canadian consumers have come to expect when using their phones for transactions at the POS.”

PayPal will use Visa Direct to enable Visa cardholders to move funds between their PayPal accounts and eligible Visa debit cards in real time.

“At the moment, our partnership with Visa is primarily aimed at mobile/e-commerce transactions," said Paul Parisi, PayPal Canada’s president. “In the future, the collaboration between Visa and PayPal will help extend PayPal digital wallet purchases on smartphones at the point of sale in bricks-and-mortar retailers that accept Visa and PayPal.”

Last October, Mastercard Canada signed an agreement with PayPal Canada, which enables cardholders to choose Mastercard as a payment option within their PayPal Wallet. Mastercard is also partnering with PayPal Canada to enable acceptance of PayPal Wallet payments at the point of sale in Canada using the Mastercard tokenization service.

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Debit cards Real-time payments Payment processing Gig economy Network rules Visa Mastercard Interac Canada