Fast Company

Visa Adds Person-to-Person Payments in U.S.

Visa just announced the ability for U.S. Visa card holders to send and receive funds from other cardholders anywhere in the world. The system, which will hit later in 2011, will greatly increase the scope of person-to-person digital payments globally.

Visa says it's mplementing the personal-payments protocol throughout its systems in the U.S., which means that at some point soon anyone in the U.S. holding a Visa debit or credit card will be able to send money to anyone else who owns a Visa card anywhere (though if you owe money to someone with a Mastercard, or just want it sent to their bank account, you're out of luck). It's a breakthrough, Visa notes, that extends the services Visa offers from the point of sale into the ephemeral digital space and lets consumers "pay one another." 

The way it works is pretty simple: If your bank supports the transaction (and Visa's careful to note this does only apply to "participating financial institutions"), then when you arrange to make a personal payment to someone else from your account, using their 16-digit Visa card number instead of their bank-account number. An email address or phone number will work, too, assuming the client has linked these details to the banks. Visa thinks "this makes sending money to a niece for her birthday or to a son in college simpler, faster, and more convenient than before." Nothing says "I love you" like cash money.

The new service was made possible by a number of moves Visa's made, including tweaks to its global payments network VisaNet and "strategic product agreements" with CashEdge Inc. and Fiserv, Inc. which are two of the "leading providers of electronic person-to-person payment" services.

Direct personal payments are, of course, already commonplace around the world; there are more than 70 different programs in place to enable account holders to send funds to Visa accounts. But Visa's press release notes that this is "the first time a major payment network has introduced a global requirement for account issuers to accept incoming funds and thus enable a new generation of personal payment services." If this impacts global digital transactions, that last bit could be especially true.

It's big news, although Visa is quiet about a couple of key issues: Fees it will charge, and security. The fees matter is key, as it will tell us how much we can expect to pay for the fact Visa's now embracing the digital era. And the security component is even more key--though Visa will undoubtedly have extra security systems in place, there's probably scope for abuse of this service because it's so fast and simple.

From an industry standpoint, what might this do to other digital payment services like PayPal, the most prominent name in online digital payments, including person-to-person transactions? Will the move by Visa merely facilitate PayPal's business, or will it threaten some of it as online shops and normal consumers adopt Visa's system to transact money instead? What about novel payment protocols like Bump on the iPhone? It's easy to see that this could make their system much simpler, unless Visa steps up with a rival app all of its own? 

We contacted PayPal and spokesman Anuj Nayar responded with the following:

"While we don't comment on competitors, it's clear that more companies are waking up to the power of digital money. As the leader in global online payments for the last twelve years, PayPal has unmatched advantages that we believe put us ahead of the competition. PayPal connects to 57 different financial networks and 15,000 local banks in 190 markets --not just in the Visa network, but with payment methods that meet our customers' preferences in markets around the world."

And that, ultimately, is likely strength that could help PayPal hold off the beheamoth that is Visa--it also utilizes non-Visa payment systems.

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