Cards Just Got REALLY Interesting Again: Quick Thoughts on Visa’s Recent Announcements

Earlier this week, Visa hosted a Visa Payments Forum in San Francisco. During the event, the company made several announcements that – assuming they are fully implemented and adopted – amount to a game-changing moment in digital payments and commerce. Here is the summary and my quick take on these announcements.

Visa Flexible Credential allows customers to choose a funding source for any given transaction either in advance by setting up rules, or at the time of the transaction. They can choose to pay right away via a debit card, put it on credit, set up a BNPL arrangement, or even pay via loyalty points. This has been done before at the individual issuer level (Chase, Monzo, or our Model Bank 2023 Award winner, Bangor Savings Bank), but implementing it at the network level makes the capability available to all Visa customers. I also remember Dynamics, a company that used to offer physical cards with multiple buttons which can reprogram the card’s magstripe, changing the card’s functionality on the fly, for example, allowing the customer to pay in rewards points instead of credit. Back in my 2019 report, I questioned "whether the physical card is the best medium to deliver it" and suggested that the same capability “can be just as easily done via a mobile app.” It seems like Visa has now done exactly that, enabling issuers to offer flexibility for their customers.

I said in the title that “cards just got really interesting”, but this potentially changes the fundamental notion of what a card even is. The old rule “one card, one funding source”, which meant that debit, credit, and prepaid were distinct cards with their own rules and economics and had to be issued separately, is potentially out of the window. Will the banks even need to “issue cards”, or will they just need a way to link those credentials to an account and potentially, a credit line? How does it change the issuer’s economics and loyalty programs? What does it mean for the merchant acceptance costs and ability to steer the customer to a preferred payment method?

Tap to Everything, although perhaps a more accurate name would have been “Tap for Everything”. Tapping a card against the phone will become the norm as the customers will be able to:

• Tap to Pay: Any device can now be a POS device. I’ve seen some comments online that this would allow anybody to accept card payments, and yes, it will make it easier, but surely, I would still need an acquiring account, right?
• Tap to Confirm: Authenticates identity when shopping online. This is big, as it turns online, cardholder-not-present (CNP) transactions into a card-present transaction akin to physical POS, which should drastically cut down the card fraud.
• Tap to Add Card: Enhances security when adding card into a wallet or app. I’ll be interested to dig more into the mechanics of it, as the tap essentially would create a token and provision it into the app. Issuers already with push provisioning capabilities have perhaps less to gain, but any app provider that wants to have a card token “on-file” should benefit from this easier onboarding.
• Tap to P2P (person-to-person): Allows money to be sent between family and friends.

Visa Payment Passkey Service will further strengthen authentication for e-commerce transactions. I’ll write more about passkeys, technology built on the latest FIDO standards, as they are rapidly gaining adoption as a secure and frictionless way to authenticate customers online. As its first deployment of passkeys, Visa is integrating the new service into Click to Pay, an EMV standard for online shopping, like a digital wallet. One of many aspects I’d be interested to understand better is the implications for other solutions being developed in various markets, such as the EU Digital Wallet(s). Still, the Passkeys and Tap to Confirm combined should radically change the security of online transactions.

Pay by Bank and Visa Protect for A2A Payments. Of course, Visa hasn’t been “just a cards network” for some time now, and these two services are examples of Visa’s further forays into non-card payments. The acquisition of Tink gave Visa presence on the European open banking stage, and it is now bringing some of these capabilities to the US market, aiming to disrupt specific segments such as bill payments.

Finally, Data Tokens are really interesting and could become “card-linked offers on steroids”. According to the announcement, “if the consumer agrees, behind-the-scenes, Visa issues a private data token to the merchant complete with AI-generated insights based on the consumer’s transaction data. The data token can be used with the merchant’s AI models to deliver real-time recommendations for the shopper. Visa will also pass the data token to the consumer’s bank to capture where the data has been shared, so the consumer can easily review where it has been shared in their mobile banking app and revoke access if they choose.” Again, lots to think through, not least how merchants and banks would react to this, but the general idea of putting the customer more in control of where and how the data about them is shared is consistent with the direction of travel. And it’s not about sharing the actual data, it’s sharing intelligence about the customers’ shopping patterns in a way that the merchant’s LLM models can consume. Keep an eye out for more from us soon on this topic.

The availability of these new services is not uniform around the world; some services are already live in some regions, while others will take time to roll out globally. The speed of that rollout will depend on how quickly the issuers, processors, and merchants get on board. But make no mistake, this is big, and there won’t be many banks that will not have to rethink their digital payments strategy.

Back in 1992, Francis Fukuyama, an American political scientist, published a book called The End of History and the Last Man. With the Berlin Wall falling and the Soviet Union crumbling, it seemed at the time that liberal democratic values and free-market capitalism had demonstrated their superiority once and for all, hence the “end of history”. It was a bold statement then, and of course, has been proved to be wrong by many events since. A couple of years ago, I wrote a report in which I said:

“Bank card issuers could be forgiven for thinking that they are experiencing their own “end of history” moment, i.e., they will continue to issue cards and support a growing range of card-based transactions, but most of the exciting innovations will be happening elsewhere. Indeed, that is a risk, but it doesn’t have to be that way. We believe that despite the significant disruption that has taken place in the world of cards over the last decade, banks can continue to innovate and play a major role going forward.” I also said that “arguably, network tokenisation is as close as the bank issuers get to their “end of history” moment: once the issuers are capable of provisioning and managing digital payment tokens, the foundation is laid for rich digital payment experiences.”

The end of history? No; the digital payments story continues and has just received a new dose of oxygen. The networks introduced payment tokenization together under the EMV umbrella in 2014, and it was game-changing then. Ten years later, Visa’s announcements feel like another game-changing moment. Will Mastercard and other networks follow suit?

There is a lot to unpack here, and I'd love to hear from all of you. Please leave your thoughts in the comments below or get in touch to discuss further.