Visa debit cards, like seemingly everything else in the world, have gone mobile. The world’s largest card network announced a deal with British mobile services provider Montilise PLC to offer the kind of services we’re now seeing in a number of mobile-payment startups. Not only will the Montilise deal increase Visa’s presence in the international community, but it will also help it to compete with Paypal, BlingNation and the Google wallet.
In the US, Visa will link Montilise with its Debit Processing Service operations to provide person-to-person payments, mobile alerts, promotional offers and remote deposit capture.
Visa is also turning its sights overseas. The card network hopes to introduce mobile transit ticketing and other services to international markets. In addition, it recently acquired Fundamo, a mobile payments provider based in South Africa, in order to expand its products to the underbanked and unbanked in the international community. Fundamo represents only one aspect of Visa’s foray into the mobile payment world: recently, it bought a stake in Square Inc, which lets smartphones accept credit and debit card payments.
Retail credit cards trade rewards for data
Visa’s promised offer of promotional details sent to cell phones is already undergoing a field test: in April, the network paired up with Gap to push location-based discounts and promotions via text message. When enrolled customers use their Visa cards to complete transactions that meet certain criteria (shopping on a certain day, at a certain time or in a certain zip code, for example), they are sent Gap promotional offers that they can redeem by showing the text messages on their mobile phones.
Store credit cards took a hit when the Credit CARD Act required anyone without an income to have a co-signer on the card, cutting down on in-store applications. However, this deal isn’t specific to the Gap credit card, and Visa gets more value than simply interchange fees or interest rates. Gap is eager to get the data provided by the enrolled customers, and will likely pay for the privilege. “[The Visa partnership] provided us insight into our enrolled consumers that we never had in the past, which improved the targeting of our promotional programs, timing of communications and allowed us to tailor offers,” said Gap’s Amy Carr. This may represent a shift from the network levying fees on retailers, to charging them for valuable data. Increasingly, we’re likely to see the card networks rely less on traditional revenue from bank credit cards – interchange and interest rates – and more on alternative methods like card fees or partnerships.
All roads lead to the Durbin Amendment
No mention of Visa is complete without a connection to interchange fee regulation. The mobile service partnership will include prepaid debit cards, which networks and banks are promoting in the wake of the Durbin Amendment. Prepaid cards are exempt from the 12-cent fee cap, so issuers have every incentive to coax customers to use them. Visa can promote the services allowed by the Montilise partnership to make prepaid debit cards seem more attractive.
American Express leads the way in promoting prepaid cards: just last week, it announced a new prepaid debit card that boasted an uncomplicated fee structure and promised to be a rare worthwhile product among the other unsavory cards. Despite being greeted with much fanfare, the AmEx prepaid debit card doesn’t live up to the hype: if you want to reload by cash, you have to pay $4.95 per reload. This essentially renders the card useless. If you have a credit or debit card, you can put money on the AmEx prepaid for free, but you have no need to use a prepaid card to begin with. If you don’t (and prepaid cards are marketed toward the unbanked) you’ll need to shell out far more than most cards charge for a reload. It seems that the prepaid market still has a long way to go.