The European payments industry is more diverse and dynamic than ever before.
According to figures from the European Central Bank, there were more than 122 million non-cash payments across the EU in 2016. Card payments made up nearly half of this total, with systems such as direct debit, credit transfer, mobile payments and checks accounting for the rest.
And the industry is about to get even broader, following Visa’s announcement of the Visa Direct real-time payments platform, which could have a big impact on how financial institutions (FIs) operate.
What is Visa Direct?
Providing access to more than one billion consumer card accounts in more than 200 global markets, Visa Direct is essentially a platform that allows FIs to handle credit transfer-style transactions via card payment infrastructure.
The API-based system enables P2P, B2B and B2C payments, both domestically and across borders.
As part of the launch, Visa has partnered with payments processor Worldpay to accelerate the speed at which Visa Direct will be made available to merchants in Europe. Worldpay’s business customers will be able to send real-time payments to consumers as soon as card issuers have made the necessary changes to make this possible.
Mike Lemberger, senior vice-president of product solutions for Visa in Europe, said this service provides an opportunity to “transform how consumers and businesses pay each other in a fast, convenient and secure way”.
He added: “Visa Direct is a proven platform that enables technology companies, businesses and financial institutions to meet the demand for real-time payments, backed by the ubiquity, cost-efficiency and speed of Visa’s global network.”
The platform is already in operation in the US, where it enables payments for the likes of PayPal, Braintree, Square Cash and Stripe.
What does this mean for the industry in Europe?
Arguably the biggest consequence of all from the launch of Visa Direct is more choice for consumers and FIs.
Banks will have a wider range of services to choose from to complete interbank transactions, while consumers will have yet another way to complete P2P payments and take receipt of transfers from businesses.
It’s also interesting to look at Visa Direct in the context of the European Payment Council’s SEPA Instant Credit Transfer (SCT Inst) scheme. This optional program, which has a starting date of November 21st 2017, will facilitate real-time transactions of up to €15,000 across more than 30 European countries.
There are some differences between Visa Direct and SCT Inst, which could determine the rate of adoption of one platform against the other. One key distinction is speed: the Visa system aims to transfer funds to the recipient in 30 minutes, while SCT Inst will aim for less than a minute.
Where Visa Direct could prove particularly useful is in cross-border payments. Europe is effectively the last piece of Visa’s global jigsaw, so this could be a highly significant milestone on the company’s journey to building a truly global payments ecosystem.
Visa has taken the approach of using its existing systems to enable interbank transactions, while Mastercard has gone out and acquired firms such as VocaLink.
It will be extremely interesting to track the progress of Visa Direct over the coming year or so, to see if the company’s strategy proves a wise one.
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