Visa's mobile payment plan 'most comprehensive to date'

Merchant acceptance could still be obstacle

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Bob Egan, an analyst at The Sepharim Group, said he applauds Visa's announcement but added that getting the PayWave application onto smartphones could be an obstacle for Visa. Another obstacle will be gaining merchant support for buying and integrating more NFC terminals and software.

"Their road to success is filled with a number of potholes," Egan said.

Visa CEO Joseph Saunders said in a conference call that Visa expects to expand its debit and credit account usage globally with the digital wallet concept to earn added revenues. In response to a question, he added that revenues "will be manifested in other sources of fee income" although he declined to name what those sources might be, citing competitive reasons.

If merchants have to pay added transaction fees to Visa and its bank partners atop the 1% to 3% fees they already pay for accepting credit-card payments by customers, then Visa's digital wallet concept could fall flat, analysts said.

"It depends if Visa's fees on the new smartphone services are replacement fees [for fees on credit cards] or additional fees," Hung said. "The latter would definitely put off merchants and consumers. The new fees would have to be at least cost-neutral, if not cost reductions, in order to see them adopted."

Visa's McCarthy said the planned digital wallet system was made possible through Visa's acquisitions of CyberSource, Authorize.net and PlaySpan. Technology from those companies will help enable payments for virtual and real products inside social networks such as Facebook; they will also support person-to-person payments, Visa officials said.

Visa has seen growth in e-commerce payments and hopes to integrate those payments with an easier one-click system that uses usernames and passwords instead of requiring a 16-digit credit card number, a security code and a shipping address, McCarthy said.

"The days of entering a 16-digit code and ... shipping address are over," McCarthy said.

Visa's Gajda said that while a one-click e-commerce payment system will be part of the new digital wallet system, payments will be even simpler with NFC on smartphones: "Just pass your phone over the terminal," he said.

The U.S. is considered years behind Japan and South Korea when it comes to adoption of mobile payment technologies, but Gajda said Visa's new direction "allows markets like the U.S. to catch up."

In addition to working with a variety of devices, Visa's system will honor payments made using other major credit cards, Gajda added. "People want to take their physical wallets into the digital world, and we believe that the wallet needs to be open. We know that people have multiple payment brands, and we want to give them choice."

Gajda also said that merchants "will want this technology," since they stand to see an increase in online sales if mobile devices are integrated into desktop e-commerce sales. "Consumers today aren't sure how secure those payments are, and it seems onerous when they are faced with filling in a form," he said. "A lot don't have the strength of Visa behind them."

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed. His email address is mhamblen@computerworld.com.

Copyright © 2011 IDG Communications, Inc.

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