By Terry Angelos, SVP and Global Head of Fintech, Visa
Whether you realize it or not, fintech innovation is likely playing a role in your daily life. In fact, 73% of Americans say that using a fintech app to manage money will be part of their new normal (1) after COVID accelerated the move to digital banking and payments.
In 2020, Visa saw a rapid acceleration of fintechs creating new products that harness Visa’s global network to create new shopping experiences, enable new payment flows and increase the velocity of payments for consumers and businesses. Our Fast Track program, which helps fintechs onboard to the Visa network, grew 360% this year (2), and this cohort is developing solutions in areas such as digital banking, wallets, payroll, crypto and commercial payment solutions.
Looking ahead, here’s our take on some key categories where fintechs are changing the payments game:
Credit your way
Many fintechs got their start with debit offerings. Now, we’re seeing interesting trends in credit. Companies such as Upgrade have created a new category of responsible credit, replacing the revolving credit feature with a personal line of credit to be paid back in equal installments. And ‘Buy Now, Pay Later’ has become the norm in many markets. Interestingly, the early adopters in this category were developing markets such as Brazil where half of Visa transactions are paid in installments (3) and this a capability we are adding to our network. Our new APIs will allow merchants and financial institutions to give Visa cardholders more options for how and when they pay for their purchases before, during or after the transaction.
Real-time payroll
If you think about how payroll has operated to date, workers essentially loan their wages to the employer until the first and fifteenth of every month. In fact, around $100B of earned but unpaid income is held every week in the US, many from hourly workers living paycheck to paycheck (4). You have already earned the money, yet it’s sitting on a company’s balance sheet. We think payroll will become available real-time – not only for gig workers but for salaried employees who are accustomed to seeing their pay arrive every two weeks. Today, a popular way to receive access to these funds is via Visa’s real-time push payments platform, Visa Direct (5). For workers, wages can be deposited to a bank account or Visa card immediately, versus waiting for the end of the pay period. COVID has accelerated this trend and Visa Direct transactions for workers seeking on-demand pay are in especially high demand amid COVID-19 (6).
Embedded finance — payments now inside your favorite enterprise software
As payments increasingly become part of the enterprise software stack, we see payment volume originating in new verticals, driven by software platforms that manage things such as restaurant bookings or gym memberships. We see Visa credentials embedded into accounts payable platforms like IoT devices such as cars, electronics and appliances. In North America alone, where we have 1 billion Visa cards (7), the potential is there to more than double the number of payment credentials.
Neobanks are creating the new community banks
50 years ago, many small banks thrived by understanding and serving the needs of a local community. Today, those communities can be found online and neobanks are increasingly creating digital banking solutions that meet the needs of specific groups and communities, including those that have long been underrepresented in the financial sector. Today, Visa is partnering with companies such as Daylight, a digital banking platform focused on improving the financial lives of the 30M+ LGBT+ in the U.S. and the first fintech in the U.S. to focus specifically on the LGBT+ community. Daylight offers a digital banking platform that prepares members for their future faster, by helping them navigate the financial system, generate smarter habits and connect with a community working together to build the life they deserve without compromise.
Dialing up digital currency
The emergence of a vibrant developer ecosystem building on top of public blockchain networks and stablecoins is leading to a new generation of digital wallets and financial services. Since the launch of Visa’s Fast Track program, about one-third of the consumer-facing companies accepted in the program are building products that use digital currencies in some capacity.
Visa has been working closely with digital currency platforms like crypto giant Coinbase, which recently announced Coinbase Card, a Visa debit card that lets customers spend their converted crypto easily. We also work closely with platforms like Fold to bridge digital currencies and our existing network of 61 million merchants. So far, we have onboarded about 25 crypto related companies at various stages of development globally.
Opening up digital wallets
Around the world, digital wallet adoption is on the rise along with a new generation of platforms such as Airwallex, Gojek, and LINE Pay. Working with digital wallet providers to embed Visa credentials into third-party payment services, Visa is expanding access to digital payments – and transforming some formerly closed-loop systems limited to certain geographies or functionalities into open ones. Interoperable payment systems benefit consumers, merchants and wallets.
It’s a privilege to serve the companies that are creating these new payment flows and expanding the reach of financial services. We recognize our role to help identify, support and onboard the next generation of payment innovators who are growing the pie for everyone. Now, let’s get to work on realizing these trends.