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Visa said it plans to launch a dedicated bank transfer service, skipping the credit card and traditional direct debit process.
Visa, one of the world’s largest credit card networks along with Mastercard, said on 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 withdraw funds directly from your bank account) in a merchant’s e-commerce store with just a few clicks.
Visa said consumers will be able to more easily monitor these payments and ask any questions with the click of a button in their banking app, giving them a similar level of protection as when using a credit card.
Visa said the service should help people deal with issues such as unauthorized auto-renewing subscriptions, making it easier for people to reverse direct debit transactions and get their money back. Visa added that it won’t initially apply the A2A service to things like TV streaming services, gym memberships and food boxes, but that’s a future plan.
The product will be launched first in the UK in early 2025, followed by the Nordic region and the rest of Europe later in 2025.
Direct debits are a headache
The problem now is that when consumers pay for things like utility bills or childcare, they need to complete a direct debit form.
But this gives consumers little control as they have to share their banking details and personal information, which is not secure, and have limited control over the amount paid.
For example, static direct debits require advance notice of any changes to the amount withdrawn, meaning you have to cancel the direct debit and set up a new direct debit, or make a one-off transfer.
Through Visa A2A, consumers will be able to set up variable recurring payments (VRP), a new payment method that allows people to make and manage recurring payments of varying amounts.
Mandy Lamb, managing director of Visa UK and Ireland, said in a statement on Thursday: “We want to bring banking payments into the 21st century, giving consumers the choice and peace of mind they know and love. digital experience.
“That’s why we’re working with UK banks and open banking players to leverage our technology and years of experience in the payments card market to create an open system that allows A2A payments to thrive.”
Visa’s A2A product relies on a technology called open banking, which requires lenders to provide third-party fintech companies with access to consumers’ banking information.
Open banking has grown in popularity over the years, especially in Europe, due to supervisory reforms in the banking system.
The technology enables new payment services that can link directly to consumers’ bank accounts and authorize payments on their behalf—provided they have permission.
In 2021, Visa acquired open banking service Tink for €1.8 billion ($2 billion). The deal comes after Visa dropped its bid to acquire rival open banking firm Plaid.
Visa’s acquisition of Tink is seen as a way for it to counter the threat from emerging fintech companies that develop products that allow consumers and merchants to avoid paying credit card transaction fees.
Merchants have long been unhappy with credit and debit card fees from Visa and Mastercard, accusing the companies of driving up so-called interchange fees and preventing them from steering people toward cheaper alternatives.
In March, the two companies reached a historic $30 billion settlement to reduce interchange fees — fees that are deducted from merchants’ bank accounts when shoppers pay with their cards.
Visa did not disclose details on how it will monetize its A2A service. By giving merchants the option to bypass card payments, Visa could cannibalize its own card business.
Visa told CNBC that it is always committed to providing people with the best way to pay and get paid, whether through card or non-card transactions.
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