Visa will launch bank payments, an alternative to credit cards

Visa said it plans to launch a special service for bank transfers, credit card skipping and the traditional direct debit process.

Visa, which is one of the world’s largest card networks alongside Mastercard, said Thursday it plans to launch a dedicated service for account-to-account (A2A) payments in Europe next year.

Users can set up direct debits (transactions that take money directly from your bank account) on merchants’ e-commerce stores with just a few clicks.

Visa said consumers can more easily monitor these payments and report any issues by clicking a button in their banking app, giving them a similar level of protection as when they use their card.

The service should help people deal with issues such as unauthorized auto-renewal of subscriptions by making it easier for people to reverse direct debit transactions and get their money back, Visa said. It won’t initially apply its A2A service to things like TV streaming services, gym memberships and food packages, Visa added, but this is planned for the future.

The product will initially launch in the UK in early 2025, with subsequent releases in the Nordic region and elsewhere in Europe later in 2025.

The problem currently is that when a consumer sets up a payment for things like utility bills or childcare, they have to fill out a direct debit.

But this gives consumers little control as they have to share their banking and personal information, which is not secure, and have limited control over the payment amount.

For example, static direct debits require that you be notified in advance of any changes to the amount withdrawn. This means you will need to cancel the direct debit and set up a new one, or make a one-off transfer.

Visa A2A allows consumers to set up variable recurring payments (VRP), a new type of payment that allows people to make and manage recurring payments of different amounts.

“We want to bring bank payments into the 21st century and give consumers choice, peace of mind and a digital experience they know and love,” Mandy Lamb, Visa’s managing director for the United Kingdom and Ireland, said in a statement Thursday. .

“That’s why we’re working with UK banks and open banking players, using our technology and years of experience in the payment card market to create an open system where A2A payments can thrive.”

Visa’s A2A product is based on a technology called open banking, which requires lenders to grant third-party fintechs access to consumers’ banking information.

Open banking has gained popularity over the years, especially in Europe, thanks to regulatory reforms in the banking system.

The technology has enabled new payment services that can link directly to consumers’ bank accounts and authorize payments on their behalf, provided they have permission to do so.

In 2021, Visa acquired Tink, an open banking service, for 1.8 billion euros ($2 billion). The deal followed a rejected bid by Visa to acquire rival open banking company Plaid.

Visa’s acquisition of Tink was seen as a way to counter the threat of emerging fintechs building products that allow consumers – and merchants – to avoid paying their card transaction fees.

Merchants have long complained about Visa and Mastercard’s credit and debit card fees, accusing the companies of jacking up so-called interchange fees and preventing them from referring people to cheaper alternatives.

In March, the two companies reached a historic $30 billion settlement to reduce their interchange fees — which are debited from a merchant’s bank account when a customer uses their card to pay for something.

Visa did not share details on how it would make money from its A2A service. Giving merchants the ability to bypass cards for payments risks Visa potentially cannibalizing its own card business.

For its part, Visa told CNBC that it is always focused on enabling the best ways for people to pay and get paid, whether that’s through a card or non-card transaction.