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Visa's mobile payment plan 'most comprehensive to date'

Matt Hamblen | May 12, 2011
Merchant acceptance could still be obstacle.

Hung and other analysts said that NFC and other technologies are mature enough to make Visa's plan "definitely feasible."

Visa has been deploying NFC with digital smartcards in its PayWave technology for about five years. It already has 150,000 terminals in place with various merchants, including McDonalds restaurants and New York taxis, said Bill Gajda, head of mobile technology at Visa, in an interview. More recently, Visa has supported its PayWave NFC with microSD cards inserted in some smartphones, but Gajda said that almost all new smartphones will soon be embedded with NFC.

Hung said phone makers will need to support the PayWave application inside each phone's secure element for the Visa service to move ahead. Visa said it plans to license PayWave technology in new phones and other mobile devices, such as tablets.

Bob Egan, an analyst at The Sepharim Group, said he applauds Visa's announcement but added that getting the PayWave application onto smartphones could be an obstacle for Visa. Another obstacle will be gaining merchant support for buying and integrating more NFC terminals and software.

"Their road to success is filled with a number of potholes," Egan said.

Visa CEO Joseph Saunders said in a conference call that Visa expects to expand its debit and credit account usage globally with the digital wallet concept to earn added revenues. In response to a question, he added that revenues "will be manifested in other sources of fee income" although he declined to name what those sources might be, citing competitive reasons.

If merchants have to pay added transaction fees to Visa and its bank partners atop the 1% to 3% fees they already pay for accepting credit-card payments by customers, then Visa's digital wallet concept could fall flat, analysts said.

"It depends if Visa's fees on the new smartphone services are replacement fees [for fees on credit cards] or additional fees," Hung said. "The latter would definitely put off merchants and consumers. The new fees would have to be at least cost-neutral, if not cost reductions, in order to see them adopted."

Visa's McCarthy said the planned digital wallet system was made possible through Visa's acquisitions of CyberSource, and PlaySpan. Technology from those companies will help enable payments for virtual and real products inside social networks such as Facebook; they will also support person-to-person payments, Visa officials said.

Visa has seen growth in e-commerce payments and hopes to integrate those payments with an easier one-click system that uses usernames and passwords instead of requiring a 16-digit credit card number, a security code and a shipping address, McCarthy said.


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