Credit Card Companies get ready for the war of the virtual wallets
Visa, MasterCard and other big payment networks need not be victims in the shift towards digital cash if they play their cards right.
Card companies, such as Visa, MasterCard and China’s UnionPay, manage credit, debit and prepaid cards issued by their members; others, such as American Express, pump out their own plastic. The amounts of credit and cash they process are mind-boggling. Last year some $6.7 trillion was channelled through credit cards managed by the networks, according to the Nilson Report, an industry newsletter. Throw in debit and prepaid cards and the number exceeds $15 trillion.
efore long all of these wallets are likely to end up on mobile phones, which can be used to buy things in stores and other places. This is where firms such as Square, which has developed its own elegant and easy-to-use mobile wallet, and Google have been focusing plenty of energy. Jennifer Schulz, Visa’s global head of e-commerce, predicts there will be a shake-out that leaves only a few wallet providers standing. Thanks to their trusted brands, big budgets and payments savvy, one or more card companies will be among them.
Card networks are also taking stakes in innovative firms to keep an eye on potentially disruptive technologies. Visa owns part of Square, which recently struck a deal with Starbucks to make its mobile-payment service available in 7,000 of the coffee chain’s outlets in America. Visa has also invested in Monitise, a mobile-banking specialist. American Express, for its part, has set up a $100m digital-commerce fund, one of whose investments is in iZettle, a Square-like firm based in Sweden.
The biggest prize of all lies in emerging markets, where a lack of financial infrastructure is hastening the rise of phone-based payments systems such as M-Pesa, which serves Kenya and several other markets. Visa has snapped up Fundamo, which specialises in payment services for the unbanked and underbanked in emerging markets; MasterCard has set up a joint venture called Wanda with Telefónica, a Spanish telecoms firm, which aims to boost mobile payments across Latin America. The payments world is changing fast but the card firms are not about to let rivals swipe their business.