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A new service from Visa will allow non-cardholders to send and receive person-to-person (P2P) payments using a range of third-party digital wallet apps.
As part of a new pilot scheme, Visa has announced that it has partnered with PayPal and Venmo on Visa+, a new service for P2P digital payments.
Scheduled to launch later this year, Visa+ users need only a PayPal or Venmo account to join the platform and start sending or receiving payments through it.
Instead of a unique card being assigned to each user, Visa+ users must set up a personalised payment address — similar to a social media handle — which is linked to their PayPal or Venmo account.
In a statement, Visa said that Visa+ will provide the building blocks for interoperability across the real-time payments landscape in the US.
At launch, Visa said that partners DailyPay, i2C, TabaPay and Western Union will integrate Visa+ payments within their platforms.
In mid-2024, Visa plans to roll out Visa+ to more payment apps, ultimately achieving “general availability” in the US market.
“Participating digital wallets, neo-banks and other payment apps, reaching millions of US users, will be able to enable interoperability through Visa+,” the company said.
“Through this collaboration, Visa+ will expand its reach and enable more use cases, including gig, creator and marketplace payouts.”
A market in need
Highlighting a study from the US Faster Payments Council (FPC), published in 2021, Visa said that interoperability is one of the key factors for success in the US faster payments market.
In its third annual Faster Payments Barometer, the FPC surveyed almost 400 financial service firms, and found that 96 percent of respondents believe that interoperability will be either “somewhat” or “very important” for success in faster payments going forward.
Similarly, lack of interoperability was the second most-cited challenge facing financial service firms in faster payments, behind high upfront costs and implementation complexity.
Simon Taylor, head of strategy and content at Sardine, a London-based payments risk and KYC solutions provider, said the simplicity of Visa+ is likely to solve some of those challenges.
“This is really one universal address to rule them all,” he said. “A few months back, I described this as a universal pointer to a wallet, and the world sorely needs this service.
“Although, like cards, I suspect we need a standard (similar to EMVCo), but we won't get that standard unless someone big makes a giant first move. This is that move.”
As an example of the interoperability pains alluded to in the FPC study, Taylor pointed out that even PayPal and Venmo are not currently integrated, despite PayPal having owned Venmo since 2013.
As Wise has written in its own payments blog, customers who have both a PayPal and Venmo account cannot transact from the same balance, and first have to transfer from one account to the other if they wish to use a particular service.
“PayPal owns both PayPal and Venmo — why didn’t this already just work?” said Taylor.
But beyond easy fixes such as this one, Visa+ could potentially transform more complicated areas such as cross-border payments, where fees and friction tend to be the highest.
For example, with the integration of Western Union, Taylor suggested that, ultimately, Visa+ could open up real-time cross-border payments to anyone anywhere in the world.
Fraud risk never too far away
However, as alleged in the Hindenburg Research exposé of Cash App last month, closed loop real-time payment apps that have low barriers to entry are likely to attract the attention of fraudsters.
As Hindenburg’s research suggests, this can be a serious enough problem when all users are located in only a single market, and this would only be multiplied if such platforms were to go global.
“P2P already had a scam issue, and it's unclear whether Visa+ is anything more than a quiet interoperability layer in the background,” said Taylor.
“So, if any wallet could send money to any other wallet, anywhere in the world, without clear rules, you know fraudsters are going to be all over that.
“But if there was a fraud and an idea of making consumers whole, and maybe even rules about how that's done, that might be interesting. But of course, then we're adding cost back.”
It is also noteworthy that there is a lack of participation from other key popular P2P digital wallets, including Cash App and Zelle.
Although the bank-based Zelle service is already effectively an open-loop P2P wallet, thanks in part to Visa Direct service (which works in a similar way to Visa+), the potential to connect the disparate US P2P systems and other digital wallets could be a very attractive prospect.
Mastercard Send also enables smaller banks that do not participate directly in the service to connect.
