Visa looks at the possibility beyond the checkout – and estimates it’s worth $ 185 trillion

Part of Visa’s strategy to capitalize on new types of money movements was the planned $ 5.3 billion purchase of Plaid, a company that allows users to link their bank account information to popular platforms such as PayPal Holding Inc.’s Venmo. Visa and Plaid called off that deal earlier this year after pushback from the Justice Department, but Visa has maintained it can still expand to new payment options without the merger, largely by leveraging its Visa Direct platform.

Visa Direct uses the company’s card rails to make payments almost in reverse order than transactions usually take place. Consumers are familiar with using their card to pay for things, but Visa Direct allows people to use the company’s infrastructure to get paid for themselves, be it through employers, friends, government agencies, insurers, or other parties. The growth was “like a rocket,” McInerney said, with 3.5 billion transactions processed during the company’s last fiscal year, up from about 2 billion a year earlier.

The pandemic has brought Visa Direct’s attention, including from government officials in the Dominican Republic who sought during the crisis to get money to citizens more quickly without relying solely on paper checks or direct deposits.

Visa’s work with governments to distribute COVID-19 emergency relief funds “sparked discussions about how we can use the Visa platform in an ongoing way to get money to citizens,” said McInerney, with Visa also offering prepaid cards that allow governments to cash out. to do. “It’s another example of a rotation that happened during the pandemic that I think will lead to the digitization of huge chunks of money movement.”

See more: The government is partnering with major banks, fintech to accelerate payments to Americans

Visa Direct is also responding to the new ways people tip employees during the pandemic. Hairdressers in the US who once received cash tips are now increasingly picking up tips through platforms such as PayPal Holdings Inc.’s PYPL,
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Venmo, for example, and Visa’s technology help those employees transfer those funds to their bank accounts immediately afterwards, if they want to.

In Russia, where customers usually cannot add tips on top of card payments because most transactions are made with a contactless card tap, a popular booking service in the beauty industry uses Visa Direct to let customers leave tips through its platform, McInerney said. .

These newer behaviors are expected to continue once the pandemic subsides, according to McInerney, while slightly older uses of Visa Direct, such as payouts in the gig economy, could take a backlash. Gig workers often rely on the technology when they request on-demand access to their earned wages at the end of a shift, and although the ride-hailing industry has stalled during the COVID-19 crisis, it is likely to pick up again once people feel more comfortable traveling and sharing spaces.

The company states that Visa Direct gives it the ability to attack $ 60 trillion to $ 70 trillion in new types of “ money movements ” in general, and MoffettNathanson analyst Lisa Ellis recently posited Visa Direct’s revenue potential for money transfers and withdrawals $ 60 billion to $ 120 billion. Visa currently only grabs 1% of that opportunity, she estimates.

Ellis praised Visa Direct technology and a similar iteration from rival Mastercard Inc. MA,
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Mastercard Send called “the most disruptive new capability the networks have rolled out in the past decade.”

Visa’s embrace of newer payment options also extends to cryptocurrencies, where the company has worked with crypto wallets to issue Visa cards that allow people to spend their assets and roll out software application program interfaces (APIs) for financial clients. institutions that want to offer crypto buying services to their customers.

“If you’re a Coinbase customer and you have a lot of bitcoin and you want to eat out, you don’t want to go through the conversion process, so Coinbase gives you a Visa card and says we’ll handle the conversion for you,” said McInerney about the card issuance partnerships of Coinbase company and about 35 other cryptocurrency platforms.

Visa recently announced that it would soon allow financial institutions to settle Visa transactions in stablecoins, a type of digital currency, which the company said would allow its partners to receive payments from Visa in digital currency and their business customers pay that way when they wanted.

The company has not yet followed suit with Mastercard, which announced earlier this month that it plans to allow merchants to accept certain cryptocurrencies directly, something PayPal is doing as well. McInerney declined to share too much about Visa’s future crypto endeavors, only to say that “if the crypto space is going to take off,” Visa wants to be “the best crypto partner of choice” for industry players.

Visa Chief Executive Al Kelly said during the company’s earnings call last month that “to the extent that a specific digital currency becomes a recognized medium of exchange, there is no reason why we cannot add it to our network, which already has more than 160 currencies today. supports. “

Outside of cryptocurrencies, Visa is also trying to attack the high opportunity it sees in commercial payments that usually take place via checks or wire transfers and bypass the card networks.

The company estimates that there is $ 120 trillion in fund transfers between companies, including $ 10 billion between companies sending money across borders. For that, Visa has a platform called B2B Connect that enables transactions between bank accounts in a way that Visa says is faster and more transparent.

“There isn’t much innovation in that area these days,” said McInerney, so it represents one of many “great opportunities to grow new flows on the Visa network.”