It goes against conventional wisdom but the most crucial battle in the digital #payments / wallets' space is happening at the infrastructure end. Let’s take a look.
Earlier this week I wrote about how #digitalwallets have become the number 1 payment method globally, with a forecasted 5.2 bn of users in 2026.
However, while everyone is focusing on the façade, there is less attention to the rails. The critical question is:
— With so many different wallets around the globe, what happens when the users of one want to communicate (send / receive funds) with those of another?
The answer is nothing. There is no interoperability whatsoever.
And this is exactly the big development:
— One year ago (April 2023) Visa announced an initiative targeting interoperability of digital payments’ rails.
— Named Visa+, it wants to enable the sending and receiving of #money across (different) digital platforms.
— Visa+ does not require a Visa card; instead, users will set up (once) a personalized payment address that will, in turn, connect to the digital wallets.
— This week, the first pieces of the puzzle came together: PayPal and Venmo have enabled Visa+ in the US.
But why is this important?
Let’s take a step back to understand the big picture:
— In essence, Visa wants to become the connecting infrastructure layer in the world of digital wallets and P2P apps. Just like it does for cards today.
— It goes far beyond the #visa ecosystem.
— Which is why Visa does not make a Visa card a requirement. It would just narrow down the scope and impact.
Success will be measured against three factors:
1. Convenience, simplicity and privacy: no personal details, no e-mail addresses, no mobile phone numbers will be required but instead only Visa’s personalized payment address. Visa becomes the infrastructure.
2. The level of interoperability. To understand today’s gap, Venmo is part of PayPal since 2013 but the two apps do not communicate with each other. It will be Visa enabling them to connect after 11 years together…
3. The ecosystem potential, i.e. a dual approach where partners extend their reach to consumers of participating competitors and consumers are incentivized to join because of the network effects. One is feeding the other in a virtuous cycle modus. That’s why Visa has already announced Western Union, DailyPay, i2c, Tabapay, Astra, Brightwell, Cross River Bank and Fiserv as future partners with a clear target to expand both the number of use cases (gig, creator, and marketplace payout) and participants (more digital wallets, neobanks, and payment apps). The big question is, of course, whether the big players will join (Apple Pay, Cash App).
For Visa and partners, it's a win-win set-up: Visa becomes the platform of choice for B2C payouts, while partners create stickiness for their customers via a much-needed functionality. The game is on.
Opinions: my own, Graphic sources: Visa, PayPal
