When one door closes another opens, as the old saying goes. Google launched Google Wallets on May 26th in partnership with Mastercard. Is Visa soon to follow? We had barely digested the news that Isis would abandon plans to develop its mobile payments network in favor of a mobile wallet strategy, when Visa announced it will launch its digital wallet system this fall. In announcing the project, Visa also said that 14 banks from the U.S. and Canada will be involved. So what makes Visa confident that it can create demand for a mobile wallet?
Well, to start there are 1.8 billion; yes that’s billion with a B, Visa cards in use globally. And more than 50 percent of the credit card transactions that take place in the United States each year are handled by Visa. Additionally, the company runs a credit card network for 16,000 banks. With such a wide variety of participants in the mobile wallet project – from banks to processors to terminal and POS vendors - and the broad mindshare of consumers, Visa has won at least half the battle to make a mobile wallet concept work. In addition, Visa is ahead of the curve on using this type of technology, having deployed similar contactless payment options with the payWave card for the last five years, and most recently in a mobile application that works in NY subways and taxis. Still, Visa will need to A) rapidly increase adoption of this method of payment and B) find a way for many more merchants to upgrade their terminals before contactless payment options gain any steam. Visa is going to use NFC technology to enable smartphones, tablets and other mobile devices to communicate with POS systems to make transactions possible. Another hope is that the technology will allow for person-to-person (P2P) transactions. What’s this you ask? P2P transactions allow two individuals to transfer money from one persons account to another. For example, a personal trainer could come to your home and after each session could receive payment by just waving two smartphones in front of one another. No need for checks, cash or bills. The P2P market is likely to be a niche play made up of small transactions, but if it helps in the adoption of using smartphones as an alternative payment device, we’re for it. Analysts across the industry have started weighing in on Visa’s digital wallet project and have stated the company has the power and push to pull this off, and have called it “likely”, “feasible” and “mature.” We think if Visa is able to manage and work out the complexity behind this project, the mobile wallet project may actually gain momentum. Google has set the benchmark with Google Wallets. We are excited to see what a Visa partnership can do.