Why Visa And PayPal Are Bringing Real-Time Expediency to Cross-Border Payments

PayPal Holdings Inc. and Visa Inc. are adding cross-border payments to an agreement to route payments made through PayPal’s Instant Transfer Service through the Visa Direct platform. The expanded agreement will allow consumers and small businesses to send or receive money to or from a Visa card account in real-time via PayPal, Venmo, or Xoom internationally.

In addition, the expanded agreement will enable PayPal to extend global white-label Visa Direct payout services through PayPal and its Braintree, Hyperwallet, and iZettle services.

While PayPal customers can use real-time domestic payment capabilities through PayPal’s Instant Transfer service in North America, as well as markets in Asia Pacific and Europe, the ability to facilitate cross-border payments will enable PayPal to support business customers that have a need to offer this service to their customers.

“This is about providing our customers—both consumers and merchants—with the tools and services they want and need to effectively manage and move their money,” PayPal says. “We rolled out Instant Transfer capabilities several years ago, but now, having seen great interest from our customers, we are expanding the service globally.”

The addition of real-time cross-border payments is expected to give PayPal a competitive leg up against many of the startups in the international online money-transfer business. 

“PayPal is a legacy player, and to compete internationally against fintechs like TransferWise and Revolut, [it] needs to be relevant to consumers and businesses in other countries where cross-border payments are more common and used to manage money as opposed to pay certain bills, which is the focus of [peer-to-peer] payments in the United States,” says Patricia Hewitt, principal at PG Research and Advisory Services LLC, Savannah, Ga. “International growth is going to be a big part of P2P payments.” 

As for Visa, pushing into real-time cross-border payments will arm the payments network with more firepower to compete with low-cost providers of cross-border payments, such as The Clearinghouse’s Real Time Payments network, says Sarah Grotta, director for the debit and alternative products advisory service at Mercator Advisory Group.

“As more real-time payment solutions are launched, such as The Clearinghouse’s RTP, that have lower price points, then Visa needs to look at where they have advantages,” Grotta says. “The speed of debit push payments, the broad reach coupled with cross-border and cross-currency capabilities, are real assets. A fully digital solution such this one from Visa Direct and PayPal makes sense now when users are not sure if physical pickup locations will be available.”

The expanded agreement will also strengthen Visa’s standing as a potential bridge between P2P solutions, experts say.

 “It may soon be possible, for example, for a PayPal customer to send money to a [Square Inc.] Cash App user or to an Apple Cash user and/or a Zelle user,” says Rick Olgesby, president of AZ Payments Group. “By signing PayPal, which also brings Venmo, Visa’s taken a big step toward connecting these currently disparate services.”