By Ray Birch
PETERBOROUGH, N.H.—Visa’s “one-card concept” is being overlooked when it comes to payments innovation, so much so that in the future it will likely be viewed as being as pivotal as the addition of chips to plastic cards, one payments expert is saying.
As CUToday.info reported, Visa later this year intends to introduce the “one-card” concept via its Flexible Credential that enables a single, digitally issued card to “toggle” between debit, credit, pay-over-time options and cryptocurrency.
Visa has been promoting the innovation as a simple means to connect to multiple banking accounts, with the company saying it eliminates the clutter for consumers that results from segmenting and juggling various banks’ credit and debit cards as they conduct their daily financial lives.
Being ‘Seamless’
“Payments users, either situationally or rules based, will be able to use different payments channels a lot more seamlessly than they do today,” said Tim Kolk, principal at TRK Advisors. “That's the easiest way for me to assess what Visa is doing. Perhaps, if someone wanted to have certain types or sizes of transactions automatically route through a credit product versus a debit product versus a BNPL product, they can create that functionality. That is my understanding.”
The innovation, according to Kolk, is good for people who care about which payment vehicle is being used for specific transactions or merchants.
‘Pretty Cool Functionality’
“It’s a pretty cool functionality,” he said. “I haven't seen this functionality in action, but the way I think it might work is you would have a credential that says ‘I'm Tim, not I’m Tim’s credit or debit card.’ That credential would route to all of your payment tools that are under the Visa branding. Then, based on the parameters you set, you could, for example, have transactions under $50 to go through your debit channel and $50 to $200 got to the credit channel, and then above $200 to buy now, pay later. So, the $75 meal goes to credit, but the four screws you bought for $1.50 go to debit. The new couch goes to the buy now, pay later channel. That's how I see this manifesting.”
Kolk agreed that the massive growth of buy now, pay later financing could have influenced Visa to make the new option available.
Tim Kolk
“I think it's just becoming more clear—with buy now, pay later—that people want to use different payment avenues, and they've got more of them now,” he said.
Effect on Digital Wallets?
As for any potential effect on digital wallets from the new payments option, Kolk said he does not think digital wallets will be affected negatively, and they may even see greater usage as a result.
“The digital wallet is where you set the rules for what payments go where. I think this just increases and accelerates mobile wallet usage as residents for your payments functionality,” Kolk said.
As with any innovation, Kolk said it will take time for consumers to adopt it.
“Just as it has taken time for digital wallets to be adopted,” said Kolk, who acknowledged mobile wallet adoption had been slower than originally expected but has shown strong adoption in recent years. “With any of these improvements in payments functionality, some people will never adopt it, some will slowly adopt and some people will jump right on board. From a consumers’ perspective, this is just another iteration of improved functionality that makes payments easier and more specific to the way people want them. I don't consider it a near-term sea change, but 10 years from now we're going to look back on this much like we looked back on chips being added to cards.”
Unlikely to Affect Usage
Kolk, too, does not see the one-card concept affecting which cards are used.
“I don't foresee a change in debit or credit usage, beyond what is normally seen,” Kolk predicted. “People choose credit, debit and other vehicles based on the specific ways they see their finances, as well as for their tolerances for things. I think this will make it easier to make those choices, as people won't have to open up a wallet to look at their credit card or debit card and pick one.”
And what about BNPL?
“Time will tell,” Kolk said. “Right now, my opinion the Flexible Credential might modestly increase the usage of buy now, pay later. For example, people who haven't used buy now, pay later much, or at all, may see that functionality embedded in their credential, giving them the idea to use BNPL. They might say, I like that idea, and dedicate some of their spending toward it. This might bring more people into BNPL who have been on the margins of BNPL usage.”
Effect on Issuers
As far as the impact on issuers, Kolk said he is still thinking through how the innovation may lead credit unions and banks to make adjustments.
“Like a lot of innovative things in the business, the smaller issuers are going to have a little trouble keeping pace as this rolls out,” Kolk surmised. “Maybe (Visa’s) rollouts favor bigger issuers? Maybe there's technology the big players have already developed in their back-office systems to address this. There's certainly going to have to be educational efforts with issuers’ staffs, to talk about what this functionality is and why there’s reasons to put the credit union’s payments cards in it. Like with all innovations, there's cycles of understanding and training and operations that will be rolled through.
Credit Unions Can’t Wait
“To the extent big issuers big issuers will have an advantage at the start, maybe greater access to this, remains to be seen,” continued Kolk said. “But with all these things, the credit unions that lean into it and don't wait for three years to adopt it will be better situated than those who don’t.”