By Andrew R. Johnson
More than 50 banks and credit unions plan to make a new "digital
wallet" service from Visa Inc. (V) available to customers, giving a
boost to the world's largest payments network as it fights for a
bigger piece of the e-commerce business.
Visa said Tuesday that the financial institutions, which issue
its credit and debit cards, will offer its new V.me application to
consumers throughout the next year. The service aims to make the
online check-out process easier for customers by eliminating the
need to enter a 15- or 16-digit card number on a merchant's website
when making a purchase.
Instead, customers enter an email address and password, which
allows them to fund transactions with cards they load in the V.me
program. The service is open to cards from competing brands
MasterCard Inc. (MA), American Express Co. (AXP) and Discover
Financial Services (DFS), and not just those carrying Visa's
logo.
"E-commerce is our fastest growing channel and ... creating what
we consider an easy, convenient, frictionless shopping experience
is key to its continued growth," Jennifer Schulz, global head of
e-commerce for the Foster City, Calif., company, said in an
interview.
The financial institutions include numerous mid-size banks and
credit unions, including BB&T Corp. (BBT), TCF Financial Corp.
(TCB), Synovus Financial Corp. (SNV), Motorola Employees Credit
Union and Pentagon Federal Credit Union. They join PNC Financial
Services Group Inc. (PNC) and U.S. Bancorp (USB), which announced
last month they were signing on to the service.
Merchants must also add the service to their websites for
customers to use it, and so far 23 online retailers have installed
V.me as a check-out option, including 1-800-FLOWERS.COM Inc.
(FLWS), Buy.com and MovieTickets.com. Visa expects more than 1,000
online merchants will be using V.me by the middle of 2013, Joseph
Saunders, executive chairman, said during a conference call last
month.
"This is a big deal for Visa," Thomas McCrohan, an analyst with
Janney Montgomery Scott, said. "They can't afford for it not to
work."
First announced in 2011, V.me is part of Visa's effort to win a
larger portion of transactions made online and develop new sources
of revenue as the market for physical retail payments reaches
maturity. Visa could also make additional fee income from banks
that sign on to the service, though Ms. Schulz declined to discuss
the financial arrangements it has with clients.
There were more than 2 billion Visa credit and debit cards in
circulation worldwide as of June 30, including 682 million in the
U.S., according to the company's most recent quarterly report.
U.S. online retail sales are expected to reach $327 billion by
2016, up from an estimate of $226 billion this year, according to a
February report from Forrester Research Inc. But e-commerce sales
make up a relatively small portion of overall retail sales,
accounting for 7% of the total in 2011, Forrester said.
Visa says it plans to add capabilities to V.me that would enable
customers to use the service on their phones in brick-and-mortar
merchants, a market being targeted by large technology players like
Google Inc. (GOOG) and AT&T Inc. (T) as well as start-ups like
Square Inc., which recently struck a deal with Starbucks Corp.
(SBUX) for in-store payments.
The company plans to make available versions of V.me services
that use a technology called near field communication, or NFC, in
some markets next year, Ms. Schulz said. NFC allows for payment
information to be transferred from devices such as smartphones to
point-of-sale terminals that are also equipped with the
technology.
In the online world, V.me puts Visa squarely in the path of
PayPal, eBay Inc.'s online-payments service that has risen to
prominence over the last decade.
PayPal allows consumers to fund transactions with credit cards,
debit cards and checking accounts they register with the service,
or existing funds in their PayPal accounts. More recently PayPal
has been pushing in to Visa's and MasterCard's turf, striking a
deal in August with competing payment network Discover to equip
physical merchants to accept PayPal at the point of sale.
While consumers are able to sign up for V.me independently of
their bank or credit union through a website, the enrollment
process is simplified when banks integrate directly with Visa, Ms.
Schulz said.
"Where they might have more success relative to others is" in
making the "process of signing up for an electronic wallet easier
if you're doing it in conjunction with a financial institution that
the consumer is working with," said Sanjay Sakhrani, an analyst
with Keefe, Bruyette & Woods.
Four of the 10 largest U.S. financial institutions have signed
on to the service, Mr. Saunders said last month.
Aside from PNC and U.S. Bancorp, Visa has yet to announce who
the other top 10 banks are. Bank of America Corp. (BAC) plans to
make the service available to its cardholders in the near future,
spokeswoman Tara Burke said Monday.
Capital One Financial Corp. (COF) has had discussions with Visa
and is evaluating various mobile wallet services, spokesman Mark
Andrews said.
Representatives for J.P. Morgan Chase & Co. (JPM), Citigroup
Inc. (C) and Wells Fargo & Co. (WFC), all large issuers of Visa
cards, either declined to comment or did not respond to inquiries
before deadline on Monday.
"You need to get the majority of your big issuers on board for
this to be a success, otherwise it does create some issues when
you're talking to merchants," who want to ensure payment options
they accept can be used by the majority of consumers, Mr. McCrohan
said.
Part of Visa's pitch to merchants with V.me is the ability to
complete more sales. The rationale is it's easier for customers to
enter an email address and password that they remember than it is
to pull out their plastic card and enter the card number each time
they want to make a purchase.
This is especially important when considering mobile devices and
tablet computers that have smaller screens, making it more
difficult to key in card numbers, Ms. Schulz said.
"From the retailers' point of view, [online] shopping cart
abandonment is a serious problem," said David Robertson, publisher
of The Nilson Report, a payments-industry newsletter. "They're
trying to put as many transactions through the online channel as
possible because it's cheaper for them."
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
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