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Visa said it plans to launch a dedicated service for bank transfers, skipping bank cards and the normal direct debit process.
Visa, which alongside Mastercard is considered one of the world’s largest card networks, said Thursday it plans to launch a dedicated service for account-to-account (A2A) payments in Europe next 12 months.
Users will find a way arrange direct debits — transactions that take funds directly out of your checking account — on merchants’ e-commerce stores with just just a few clicks.
Visa said consumers will find a way to watch these payments more easily and lift any issues by clicking a button of their banking app, giving them an analogous level of protection to after they use their cards.
The service should help people take care of problems like unauthorized auto-renewals of subscriptions, by making it easier for people to reverse direct debit transactions and get their a refund, Visa said. It won’t initially apply its A2A service to things like TV streaming services, gym memberships and food boxes, Visa added, but that is planned for the longer term.
The product will initially launch within the U.K. in early 2025, with subsequent releases within the Nordic region and elsewhere in Europe later in 2025.
Direct debit headaches
The issue currently is that when a consumer sets up a payment for things like utility bills or childcare, they should fill in a direct debit form.
But this offers consumers little control, as they must share their bank details and private information, which is not secure, and have limited control over the payment amount.
Static direct debits, for instance, require advance notice of any changes to the quantity taken, meaning you might have to either cancel the direct debit and arrange a latest one or perform a one-off transfer.
With Visa A2A, consumers will find a way to establish variable recurring payments (VRP), a latest variety of payment that enables people to make and manage recurring payments of various amounts.
“We wish to bring pay-by-bank methods into the twenty first century and provides consumers alternative, peace of mind and a digital experience they know and love,” Mandy Lamb, Visa’s managing director for the U.K. and Ireland, said in an announcement Thursday.
“That is why we’re collaborating with UK banks and open banking players, bringing our technology and years of experience within the payments 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 offer third-party fintechs with access to consumer banking data.
Open banking has gained popularity through the years, especially in Europe, because of regulatory reforms to the banking system.
The technology has enabled latest payment services that may link on to consumers’ bank accounts and authorize payments on their behalf — provided they have permission.
In 2021, Visa acquired Tink, an open banking service, for 1.8 billion euros ($2 billion). The deal got here on the heels of an abandoned bid from Visa to purchase competing open banking firm Plaid.
Visa’s buyout of Tink was viewed as a way for it to get ahead of the threat from emerging fintechs constructing products that allow consumers — and merchants — to avoid paying its card transaction fees.
Merchants have long bemoaned Visa and Mastercard’s credit and debit card fees, accusing the businesses of inflating so-called interchange fees and barring them from directing people to cheaper alternatives.
In March, the 2 firms reached a historic $30 billion settlement to scale back their interchange fees — that are taken out of a merchant’s checking account when a consumer uses their card to pay for something.
Visa didn’t share details on how it could monetize its A2A service. By giving merchants the choice to bypass cards for payments, there is a risk that Visa could potentially cannibalize its own card business.
For its part, Visa told CNBC it’s and all the time has been focused on enabling one of the best ways for people to pay and receives a commission, whether that is through a card or non-card transaction.
