Visa said it plans to launch a service exclusively for bank transfers, skipping the credit card and traditional direct debit procedures.
Visa, one of the world’s largest card networks alongside Mastercard, said on Thursday it plans to launch a dedicated account-to-account (A2A) payments service in Europe next year.
Users will be able to set up direct debits (transactions that withdraw funds directly from a bank account) on a retailer’s e-commerce store with just a few clicks.
Visa said consumers will be able to more easily monitor these payments and report any issues by clicking a button within their banking app, giving them the same level of protection as when using their card.
Visa said the service should make it easier to reverse or refund direct debits and help address issues like unauthorized automatic renewal of subscriptions. The company added that the A2A service won’t initially apply to streaming TV services, gym memberships or food boxes, but that it’s planned for the future.
The product is expected to be launched first in the UK in early 2025, followed by the Nordics and the rest of Europe in the second half of 2025.
Account withdrawal problems
The problem now is that consumers are required to fill out direct debit forms to set up payments for things like utility bills or child care costs.
However, this gives consumers little control, requires them to share unsecured bank account details and personal information, and gives them limited control over the amount they pay.
For example, with static direct debits, you need to be notified in advance about any changes to the debit amount, so you either have to cancel the direct debit and set up a new one, or carry out a one-off transfer.
Visa A2A allows consumers to set up a Variable Recurring Payment (VRP), a new type of payment method that allows them to make and manage recurring payments of varying amounts.
“We want to bring the way banks pay into the 21st century and give consumers choice, peace of mind and the digital experience they know and love,” Mandy Lamb, Visa’s managing director for the UK and Ireland, said in a statement on Thursday.
“That’s why we’re working with UK banks and open banking companies, using our technology and years of experience in the payment card market to create an open system for A2A payments to thrive.”
Visa’s A2A product relies on a technology called open banking, which requires lenders to provide third-party fintechs with access to consumers’ banking data.
Open banking has been gaining popularity for many years, especially in Europe, thanks to regulatory reforms in the banking system.
The technology has enabled new payment services that can be linked directly to consumers’ bank accounts and, with permission, authorise payments on their behalf.
In 2021, Visa acquired open banking service Tink for 1.8 billion euros ($2 billion). The deal came on the heels of Visa abandoning its bid to acquire rival open banking company Plaid.
Visa’s acquisition of Tink was seen as a way to preempt the threat from emerging fintech companies that are developing products that allow consumers and merchants to avoid paying card transaction fees.
Retailers have long lamented Visa and MasterCard’s credit and debit card fees, accusing the companies of inflating so-called interchange fees and discouraging them from steering customers to cheaper alternatives.
The two companies reached a historic $30 billion settlement in March to reduce interchange fees, which are deducted from merchants’ bank accounts when shoppers use their cards to pay.
Visa didn’t provide details about how it plans to monetize its A2A service, and by giving merchants non-card options for payments, Visa risks cannibalizing its own card business.
Visa, meanwhile, told CNBC that it has always been focused on enabling the best ways for people to make and get paid, whether for card or non-card transactions.
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