Expert Q&A: the next generation of money movement methods

Sean Pitman, head of product strategy and commercialisation at Visa Direct Europe, explains how digital innovation has been reshaping the payments ecosystem – and where further advances can be made

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How has the payments landscape changed in recent years? And what have businesses come to expect from providers?

Historically, the market for payment capabilities was limited to high-street banks and the like. Today, there’s a plethora of choices. Fintech firms – especially neobanks – have created many new ways to move money, both for consumers and businesses. These services have become a big part of the payments world and are driving new innovations and use cases.

In any transaction, there are several partners involved, and that increases when the transaction is cross border. So there’s a lot of focus on simplifying these connections between intermediaries, to create single, easy-to-implement solutions for business, while the complexity of managing partners is left to the service provider. 

Managing several partners is complicated and any business would prefer to deal with a single partner that can provide a range of offerings that meet all its needs. These will, of course, vary depending on the industry and vertical that the company is in and, if it’s sending payments across borders, what corridors it has to use. But businesses today look for improvement on what they’ve always sought: reliability, speed, security and a good price.

What innovations are driving the adoption of digital payments in Europe?

Digital wallets and neobanks have brought aliases to the forefront of payments. If you’re both on Revolut, for instance, you can pay each other using a Revtag. If you’re on Vipps (a popular payment app in Norway), you can use a phone number. But this is generally possible only if you’re in the same ecosystem.

What we’re seeing is a need for that kind of functionality to be available across systems and products. That’s a space that Visa is really investing in. Eventually, it won’t matter whether we’re on the same platform or not. I’ll still be able to pay you if I know your phone number.

European neobanks are offering more and more services to try to become one-stop finance shops. I don’t think that anyone has cracked this yet, because it’s very difficult. There are so many payment options – it’s hard to factor all of these into an app or product with a nice user experience.

Have cross-border payments improved? And are there any particular niggles that businesses still face?

It used to take quite a while to move money across borders. Because there were often several banks in the chain, it wasn’t clear when the funds would arrive or how much the transaction would cost. But new technologies have created a transparency that has attracted a lot of volume away from traditional cross border transfers. You know on sending your money how much of it is going to arrive and when. You can have real confidence in that.

Digital wallets are also a huge growth area, particularly in underbanked markets. These have given billions of people in what were traditionally heavy cash economies access to digital finance. That in turn has enabled the diaspora in Europe and beyond to send remittances back to their families more quickly and cheaply than more traditional methods allowed. 

Foreign exchange is still a challenge in certain corridors. To go back to remittances, it’s a highly competitive market – and FX matters. People shop around when they want to send money home to their relatives, as they want them to receive as much of it as possible. They’re always seeking the best prices. That’s why we’ve seen a big take-up for remittances at Visa Direct. Our global reach enables you to send money to 190-plus countries at really competitive rates. With our wallet capability1, we can also access huge swathes of the population that we couldn’t previously reach simply because they didn’t have bank accounts.

What innovations are helping to keep payments secure?

There’s been a huge growth in token transactions, whereby sensitive card data is replaced with an algorithmically generated number. These can improve security and create a better customer experience, particularly when people are nervous about sharing card details. In fact, Visa has more tokens than physical cards in circulation worldwide.

It’s vital to ensure that fraud monitoring keeps pace with all the other technological innovations in this field. With real-time2 payments, for instance, the risk of fraud or other losses is heightened by the inherent speed of these transactions. 

There’s going to be real growth in AI and other monitoring tools designed to churn through huge quantities of data and detect suspicious activities. Visa, which has been developing anti-fraud tech for more than 60 years, is collaborating with key players in the UK to develop new solutions.

What solutions can help businesses to improve how they pay workers?

Many freelancers operate in different countries from the firms that engage them. Historically, paying these workers through banks has been quite complex. However, Visa Direct can help freelancers get paid, across the world, in their preferred method whether that is through eligible cards, accounts or a digital wallet1. These funds can be received quickly, and workers know exactly when they will receive the money. Earned Wage Access (EWA) solutions through an EWA provider also enable workers to access funds midway through a typical salary payment cycle.

How might central bank digital currencies (CBDCs) change the payments landscape?

Many central banks are exploring this space – and it needs to be explored – but CBDCs are probably a few years away from the mainstream. We’ll see more innovation and trials, but there are still several challenges in blockchain finance concerning scalability, as well as other issues to be resolved.

A central bank, leading from the top, may be able to drive innovation faster than someone in the decentralised finance space with a solution they’re developing organically. But, to really break through, CBDCs will have to solve a problem that existing payment methods don’t.

Some challenges include the voluntary adoption of a government-owned blockchain infrastructure as money becomes traceable and hence taxable. While it would solve transparency, there may be other barriers to users voluntarily participating. Another challenge is that fast, secure money movement is being solved by non-blockchain means such as local and global real-time2 payment rails. Countries like Singapore and Canada have dropped the idea as they don’t consider the case strong enough for CBDCs.

There are conflicting schools of thought here as several countries and the EU are developing their own versions of CBDC, but it remains to be seen how this plays out in the current payments landscape. 

1 Wallet functionality varies by market. Please consult your Visa representative.

2 Actual fund availability depends on receiving financial institution and region.