announced today it will launch a next-generation digital wallet service which aims to revolutionize electronic payments, including those made online, on a mobile phone, or offline at the point-of-sale. The platform allows consumers to create a digitized version of their actual wallet, in which they load all their cards, whether Visa or not. Even merchant loyalty cards will be supported.Visa
When making a purchase on the Web, this new system offers a click-to-purchase functionality that does away with the long, tedious form filling currently necessary on the websites belonging to online merchants. Instead, a username and password will be all that's required to complete a purchase. Offline at retailers' locations, the mobile wallet will support the use of promo codes sent via SMS, barcode scanning and NFC technology, the latter which allows a customer to pay with a wave of their phone instead of with a swipe of a plastic card.
Replacing the Magnetic Stripe with Modern Technology
Visa introduced the magnetic stripe over 30 years ago, but now, that technology's time is coming to an end. There is a global movement underway involving the digitization of cash and checks, explains Jennifer Schulz, Head of Global Product Strategy Innovation & eCommerce at Visa. This mobile-driven force of change has come about due to the widespread ubiquity of mobile devices, and it has impacted the way merchants and retailers interact with each other.
While the mobile stripe has allowed for a convenience that consumers now take for granted, we now have the technology to replace it with something even better: a digital wallet.
The system that Visa is launching, includes three key pieces: an e-commerce offering, an m-commerce offering and an offline piece for point-of-sale transactions.
Online Shopping Revolution: No More Forms to Fill
Online shopping, whether done via a desktop computer or a mobile phone, will see the most radical impact in the short term. Currently, consumers wishing to make online purchases have to fill out long forms at each retailer's website in order to complete their transaction. In addition to filling out name and address (both billing and shipping), they also need to fill in their credit card number, expiration date and their card security code.
No longer will that be necessary.
In Visa's new system, the customer replicates their wallet online during a one-time setup and can then simply use a username and password to complete their transactions. The benefit to the consumer, obviously, is ease-of-use, but for the merchant, the benefit (besides these easier transactions for customers, of course) is that they'll no longer have to store customers' credit card information on their own servers. With Visa's digital wallet, the company is offering a global "card-on-file" system which retailers can tap into, leaving much of the security up to Visa.
What's NFC & How Will It Be Used at POS?
Offline, at the point-of-sale, the platform will take advantage of NFC technology. NFC, short for near field wireless communication, allows users to tap or wave their phone at an NFC-enabled terminal in order to pay for a transaction. NFC is now being built into modern smartphones including Google's Nexus S, Samsung's Galaxy II, Nokia's Astound and the BlackBerry Bold 9900/9930 devices, among others. Visa also offers cases and SD cards for non-NFC phones, in order to offer backwards compatibility to older devices. While still an emerging technology, it's expected that NFC will ultimately play a large role in the future of commerce.
Currently, there are 150,000 retailers in the U.S. with readers that accept NFC transactions, including big names like McDonald's, CVS and Foot Locker, to name a few. These readers, in some cases, may be branded as supporting Visa's PayWave, but any contactless reader will accept these sorts of tap-to-pay transactions thanks to the global standard agreed upon by the payments industry.
While the penetration of a large number of NFC terminals is still 3 to 5 years away, says Schulz, the environment is ramping up to embrace the technology more fully.
In the meantime, non-NFC equipped merchants can instead use Visa's platform to send promotions to customers via SMS technology, email or barcoded mobile coupons, which could then be shown to the merchant at the point-of-sale, or even printed out, if necessary. A recent example of this system launched in April in partnership with clothing retailer The Gap. The store offers real-time, location-based discounts to customers over SMS. The system knows when a customer is out shopping and where, thanks to the real-time processing capabilities of Visa's payment network. Those consumers are then sent an over-the-air mobile coupon for use at The Gap via text message.
Schulz, in describing the platform, wanted to make it clear that this sort of technology is opt-in only. "The consumer is at the center of the product," she explained. "They have to opt-in to any rewards, discounts, offers or other value-added features a merchant offers."
But Visa's digital wallet goes even further than that in its consumer-focused capabilities. Users can also access online controls that allow them to configure which cards are used for different types of transactions. For example, everyday purchases could be set to use your debit card by default, but travel-related purchases, like buying online airline tickets or paying hotel bills, for example, could be automatically configured to use your credit card.
Banks On Board
Financial institutions can also use the wallet to dole out rewards points and other offers to consumers as well. At present, Visa announced that it's working with the following financial institutions and organizations, with more to come: Barclaycard U.S., BB&T, Card Services for Credit Unions, ICBA Bancard, First Financial Bank of Ohio, Nordstrom fsb, Pentagon Federal Credit Union, PNC Bank, PSCU Financial Services, Regions Bank, Royal Bank of Canada, Scotiabank, TD Bank Group (U.S. and Canada) and U.S. Bank.
We also know that Visa was trialing its NFC-based PayWave service with Chase, Wells Fargo and Bank of America, too, so we would not be surprised to find those institutions on the list in the near future.
Launch Time Frame
The digital wallet platform will launch in the U.S. and Canada first, in fall 2011. It will then expand elsewhere in the world in the coming months. Also an important aspect to Visa's global ambitions is addressing the needs of emerging markets. Visa will work with financial institutions to serve the banked, under-banked and "bankless" customers in those regions. Here, a scaled-down version of the digital wallet will be present, allowing for transactions over SMS or through applications used on the SIM card, as made available through partners.
On modern smartphones, all the major mobile operating systems will be supported. "If consumers are using it, we'll make it available to them," Schulz says. On these platforms, mobile transactions, NFC and even digital, mobile coupons will be available.
There has been much talk about digital wallets and, specifically, mobile wallets in recent days, with everyone from Google to Apple and even the mobile operators themselves having been pegged as being involved in building a consumer-facing platform, in some form or another. Visa, however, will be one of the first to actually launch a system to end users, from what we know as of today. That, plus their brand name recognition and the openness of the platform itself, may give them the advantage in the race to become your mobile wallet of choice.