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Visa Inc. on Thursday cemented into place two more pieces of a developing strategy for what is rapidly turning into a hotly competitive market for mobile payments. The world’s largest card network announced it had struck an agreement with Monitise PLC, a U.K.-based provider of mobile services for financial institutions, to add mobile-payments capabilities such as top-ups and transit ticketing in international markets. In the U.S., the deal will include a joint Visa-Monitise mobile-banking product for clients of Visa DPS, Visa’s debit and prepaid processing unit.
Visa also said it has bought Fundamo, a South Africa-based mobile-payments provider, for $110 million in cash. The deal, which is aimed at unbanked and underbanked consumers in overseas markets, represents the fourth high-profile acquisition by Visa in less than a year. Last summer, it closed on a $2 billion buyout of CyberSource Corp., a vendor of online risk-management services, and early this year it bought PlaySpan Inc., a transaction processor specializing in online games, for $190 million in cash. In the mobile market, Visa in April bought a stake in Square Inc., a vendor of equipment that lets smart phones accept card payments.
With Monitise, Visa says it will offer a portfolio of services in the U.S. market tied to its DPS, or Debit Processing Service, operation. Current plans call for these to include person-to-person payments, remote deposit capture, mobile alerts, and promotional offers delivered to handsets that can be tailored to the user’s location. DPS processes prepaid and debit card transactions at the point of sale and at ATMs. It processes for three of the five largest U.S. debit issuers, and 29 of the top 100, Visa says, without naming clients. DPS is also the country's largest processor of Visa-branded prepaid payroll cards, Visa says.
The company won't say when these products will become available, nor discuss pricing plans.
Linking prepaid processing in particular to the Visa-Monitise service could be a canny move, coming just weeks before the expected effective date for a new law that will impose strict new limits on debit card interchange fees. The law, known as the Durbin Amendment to the Dodd-Frank Act passed last year, exempts reloadable prepaid cards, allowing issuers to continue earning current rates and putting pressure on issuers to make prepaid offerings more attractive with services such as mobile access. “The Durbin Amendment could well fuel prepaid cards, and so [issuers] need to offer a full suite of services for prepaid,” says Todd Ablowitz, president of Double Diamond Group, a payments consultancy in Centennial, Colo.
A bill in the U.S. Senate to delay the amendment’s effective date, currently set for next month, failed on Wednesday when it fell short of the required 60 votes.
At the same time, while Durbin may expand the market for prepaid products, cardholders are increasingly expecting prepaid cards to feature mobile services. “You’ve got to have services like this to attract prepaid accounts,” says Ablowitz. “It’s table stakes.”
The Monitise announcement comes in the wake of launches by major corporate players such as Google Inc. to create mobile wallets to let consumers buy products at the point of sale with a wide array of payment cards and to receive deals and offers from merchants. Though it is not participating in the Google wallet, Visa announced in May it has developed a digital wallet for mobile and online use that can hold cards that work on a variety of networks, not just Visa.
