Visa Digital Wallet

So what does Visa plan to do that PayPal doesn’t do already?

I look at this as a non-announcement, a rebranding of what CYBS and PlaySpan already have. Too many teams are angling to create the wallet (mobile, online, …), and not enough focusing on the value of what is in it. Google, Apple, and RIM will win the mobile wallet wars. I guess I can’t blame Visa for trying.. however it would have been nice if they could have been successful at eCommerce to start with. If they had CYBS and PayPal would have never developed. I see little hope for them doing any better in mobile. They don’t own the customer and can’t really deliver any value.. but hey.. they have a tremendous number of nodes that they want to use.. too bad that the rules are so heavily driven by banks.

CYBS is a great company, in 2009 it processed one out of every 4 purchase transactions online, with over $120B in GDV. Small and mid size merchants flock to them because they are a one stop shop with great service. CYBS and PayPal both came to exist because card networks were incapable of helping either issuers or merchants manage the unique transaction risks associated with CNP transactions… as well as support for taking a card online. Visa has spent enormous sums trying to create improved authentication approaches (remember Verified by Visa?).  Their problem was not just technology and user experience, but business model. In the UK, VBV received substantial traction when merchants signed on to the liability shift. But then the issuers were left holding the bag for a broken technology with a merchants also suffering from drop off in completed purchases as customers saw a pop up ask for their PIN..

Rather than go through this terrible learning experience yet again they did the right thing and bought CYBS. Of course there were other synergies as well…  They now have an eCommerce acquirer. So the model is somewhat like DPS.. Get member banks to sign up their merchants, Visa gets a service fee, banks get a new revenue stream… ? Have you spoke to a happy Visa DPS customer?

Take a look at the banks that have signed on here. From the announcement: Barclaycard US, BB&T, Card Services for Credit Unions (CSCU), ICBA Bancard, First Financial Bank of Ohio, Nordstrom, Pentagon Federal Credit Union,  PNC Bank,  PSCU Financial Services,  Regions Bank, Royal Bank of Canada, Scotiabank, TD Bank Group (US and Canada) and US Bank.

Notice anyone missing? Top 5 issuers? Banks with significant merchant business?  What I would really like to see is the growth projections of this new service vs. what CYBS/Playspan would have done normally.

Digital Goods. Let me digress in an example. Why was Playspan so successful? Many reasons, but for one it had a substantial in store presence for gamers (with no bank account). Guess how much Playspan had to pay the card distributor? 15%. Will be interesting to see how Visa integrates a digital wallet with a cost of funds of 1500bps and then evolve to letting this same wallet be used for eCommerce. This may be why Visa is emphasizing card funding.. but guess what.. gamers (digital goods) don’t thrive on this model.

As a consumer, will I create a visa wallet to pay for goods? Why should I? What is in it for me after the bank has scaled back my loyalty programs and hit me with new fees.. ?

As a merchant will I switch to CYBS? Only if CYBS offers great service..

I just don’t see the value here.. someone please enlighten me. I do give Visa credit for dumping a VBV 3.0 strategy in favor of CYBS. What I love best is Visa taking out 2 great companies.  Now another round of start ups can develop to provide cutting edge service to retailers. The last great innovation from Visa was Debit.. well it wasn’t really from Visa.. … this does not feel like Debit.

I look forward to next 12 months when we will see 2 large issuers pull the Network brands off of their debit cards. In 5 years Visa will be left with credit only.. They do need a growth business.