“Money is nothing but alphanumeric data and it would become alphanumeric data not in paper form, but in a form of arranged electrons and photons. And they would move around the world at the speed of light by infinitely diverse paths through the entire electromagnetic spectrum.”
— Dee Hock, Founder, Visa
We carry out numerous transactions online in our daily life, be it from our grocery orders or the shopaholic souls inside us, the Money has to be transferred from the buyer to the vendor despite the method of payment either through credit cards or digital wallets. You would be flabbergasted if you get to know the no. of parties involved to make it seamless for us. One such party is Visa (NYSE: V), the global payments technology company which recently announced in its blog to be platform-agnostic advancing its services to the sprouting world of digital currency.
MONEY-The Indispensable Word
Visa is a payment processing company that acts on an open-loop network connecting various stakeholders including the cardholders, merchants, acquirers and issuers. It is a global leader operating across 200+ countries enabling a seamless movement of “money” not just across financial institutions domestically but also internationally.
With the advent of digitization and liberalization in many countries, the term “Money” has taken various forms. After the abolition of Gold Standard followed by the fall of the Bretton Woods system, Fiat Currency came into play but proved ineffective in some nations leading to currency crises like the Latin American Crisis of 1994 or The Asian Financial Crises of 1997. Ever-evolving money, has now over a decade, took the form of Digital Currency revealing a wide range of opportunities and disrupting all existing mechanisms. Companies have to adapt the transformation for their survival in the near future and so did Visa.
Visa – Everywhere you want to be
Let’s try and understand the business model of Visa in brief with an example.
We often see “Visa logo” in almost all of our credit and debit cards but we should remember that VISA never issues credit nor any card. Visa partners with Issuers (financial institutions) who issue visa branded cards and credit, fixes interest rates and other fees, and Acquirers who solicit merchants to accept Visa Cards in return for merchant discount offers.
Visa provides transaction processing services comprising authorization, clearing, and settlement, and various other value-added services such as risk management, debit issuer processing, loyalty services, and information services.
The main operating revenue stream for Visa is through
- Service Revenues from financial institution or issuer clients based on the payment volume made on visa-branded cards.
- Data Processing Revenues earned for authorization, clearing, settlement, and other maintenance and support services based on the number of transactions processed.
- International Transaction Revenues from cross-border transaction processing and currency conversion activities.
Visa’s network-of-networks strategy aims to increase Visa’s value and reach by extending onto networks beyond Visa’s own 61 million merchants.
Visa’s Outlook on Digital Currency Payments
On July 22, 2020, Visa published a Blog titled “Advancing our approach on digital currencies” describing its philosophy and a change towards the stable coins (fiat-backed digital currencies) based payment innovation. Whilst having experience in the crypto world by establishing partnerships with 25+ digital currency wallets, and licensed platforms like Coinbase and Fold already, Visa is all set to exploit Digital Currency wallets space through their FastTrack Program enabling Fintechs to integrate to Visa’s global network.
Visa also confirms a strategic plan to work with global organizations and policymakers to create a forum and to emphasize the central banks to explore the concept of Central Bank Digital Currency (CDBC) reflecting key values such as
- Maintaining data security, consumer privacy, integrity and trust, complying all applicable laws
- Remaining currency- and network-agnostic aligning with their broader network-of-networks strategy.
- Alignment with Visa’s core capabilities of continuous availability.
With their robust Research Team, Visa promises to extend its services as a valuable choice in the digital payments industry to large number of people, businesses and economies all over the world in the decades to come with technology-enabled solutions and robust partnerships.
New networks. New technologies. Endless possibilities
While Visa has set out its strategic moves, Mastercard its rival granted Wirex (London-based digital payments firm) principal membership status, the exact same status Visa granted to Coinbase, enabling Wirex to issue payment cards to consumers. With all this being said and done, the status of the global payments industry is booming with technology-enabled solutions building a better place for us to live in.