Q&A: untethered – Visa and the future of payments

bluenotes: We’re in the Visa Innovation Centre in Singapore, a very modern looking space with lots of fascinating, payments-related technology and creative looking staff – and a real life Tuk-tuk. What is this space Chris?

Chris Boncimino: It says innovation centre over the door but it's a collaboration space actually, that's what we do here. We learned early on that if we really want to operate at the speed that our clients want to move we have to create a place where our clients can come properly prepared and we can work together to solve problems that matter to them.

“Our clients are asking us for ways to untether their card, to untether the physical point of sale, to make secure payments in new ways.” - Boncimino

So what we've just walked through is a working lab. We have people sitting in it. We have designed the space with collaboration rooms for basic project development. So there’re different rooms. One room for technical people. A room for program people, a room for designers. Then this whole facility is designed around a problem statement - like how might we improve on financial literacy between parents and children? And then we get to work on solving that together and we use stimulus material. We use examples. We do research out in the field and then we build the solution together with API technology.

Ultimately the goal is to have our clients leave here with working code. So that collaboration approach, it's new. Once upon a time people would publish document specs and you'd pick it up and you'd work with it. The fastest way to build toward solutions is to actually come here, work together, sit down roll up our sleeves and get stuff done.

AC: Historically Visa was an association of banks, now it’s an independent, public company. Its role was originally to authorise payments between banks. Now it seems your ambition is much broader?

CB: You're right. Visa was an association of banks, a credit card company, authorised by banks as a repository for customer financial information and the merchants who sold things to a customer. But today it's not just about banks and Visa. In those earlier days we often looked at our customers but not in the same way.

Today we are looking at them based on where they sit geographically, what border? What population do I reside in? And there are different types of populations within populations. I am a member of a Facebook group. I sit within a WhatsApp community. I am a user of Android - as a population that is the world’s largest with two billion residents now.

So the work that we have to do of course is to be compliant with the geographic boundaries. But really we need to find the way for those populations; a way that we can authorise credentials for payment into those diverse populations - where people need it.

So when our clients come to this centre we walk through that, it's a different way to think. So we have a group of folks who work on those strategic partnerships with big hardware and software technology players, with messaging clients, to work out the best way for Visa cards to be used online.

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AC: Visa used to talk about being a “global authorisation intermediary”, now you talk about “credentials”, is that something different?

CB: I actually think we’re closer to our charter than we've ever been right now. If the charter was around digitising currency, we are closer to doing that than ever. So we've always tried to be neutral on the form factor, neutral on selling a credit card or selling a debit card. It's about making currency move online. So maybe in the early days we talked about account numbers, 16 digit numbers on the back of cards. Today we have to think and talk differently. Credentials become the way to express that secure identity.

But ultimately we don't want people thinking “gosh I mean to use my phone today” or my 16 digit card number. We want them to see something they recognise as their bank, see that imagery. It needs to be “that’s my bank, a logo I can trust, and I can push the payment to a music subscription for example.

AC: Does that mean the old plastic card will disappear?

CB: Well not immediately. It's going to be here awhile. People have habituated around that process, they do it without even thinking; taking a card out, touching it to a contact point, they know how and it works great. The card might be one of the greatest product inventions ever but I think over time card use will reduce. There'll be a parallel period of innovation, mobile technology, wearable technology - as long as it's a better experience or perhaps it brings more.

For the consumer, what are the issues at the point of sale? What can Visa bring to that? You can bring innovation, more value added services into the transaction flow than existed before. Your plastic card doesn't carry with it a digital receiver but your device does, a plastic card doesn't have a loyalty system stapled through it but a device can. A device can also track where the transaction occurred. A device can also recognise you.

AC: We’re obviously seeing more and more diverse ways to pay and even some – like the QR codes which are behind the Chinese mobile payments revolution – which are really old technologies being revived. How do we manage all those ways to pay? For example you’ve got a wall of cubes in the centre here that seem to number in the hundreds breaking down all components, whether technology, device, protocols.

CB: There is hugely more variety in the payment system but the foundations are the same: a secure way to pay. We start from there. We start with a secure way to pay. We talk about standards these ways have to meet to get the transaction done.

Our clients are asking us for ways to untether their card, to untether the physical point of sale, to make secure payments in new ways. QR is an expression of an untethered card. It's accepted by a merchant with an untethered Point of Sale device. The beauty of it is it takes hardware out of the equation. We love that.

Untethered – where the merchant doesn’t have to be online or dialing up on a phone - can open up new markets. So QR codes can be very important in that untethered world.

I just went to the Winter Olympics in Pyeong-chang and it was cold there. The Winter Olympics are cold and Visa’s a top sponsor for the Olympics. We help with the point of sale equipment and we had this mountain location where the skiing events were on. It was negative 20 degrees out there and our physical points of sale were freezing. Now there's still some mechanics in there around processing payments, thermal printing components don't respond well when it's like minus 20. So we were testing around it, looking at solutions but wearing bulky gloves is not great with thermal printers.

But when you untether the point of sale it becomes a device like a camera. You don't have to worry about those degrees below zero. The Olympus in the cold is an extreme example but all these use cases where payment needs to occur then become easier once you start to adopt this way of thinking.

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AC: When you think about these sorts of payments, using QR codes for example, untethering as you say, you can see more cash transactions being replaced. Will this hasten the demise of cash?

CB: Every year we take things a step forward in cash displacement and somehow on the other side cash continues to keep being a part of the world. So from a Visa perspective and that of the payments industry we have lots of work yet to do. But I think we're taking big steps forward.

Take the Hawker Centre example. In Singapore a hawker centre is like an eighty foot wide food store, a foodie paradise. You usually have to have cash. Those are places where money needs to transfer very quickly. That's the mission for us, it becomes the crucible for the digital experience. Can you get it done fast, securely, at the pace of the consumer, at the pace of the merchant. Does the experience work in a food stall or even on the street with someone taking a charity donation? How can you get that done in a way where you may not have to break stride with the transaction. I think these capabilities we are working on are allowing us to do that for the first time.

AC: These developments do sound great and the examples we’ve looked at here in the centre are really impressive but then you stop and think: you created an online card for me in 45 minutes, you used facial recognition, you knew my credit history. People are starting to worry about how much institutions know about us, how do you balance the security of the transaction and the privacy of the customer or mechant?

CB: Privacy is always a concern and we take it very seriously.  As our issuer clients do. Merchants certainly do. So that's part one. I think if we unpacked each of these experiences and got to the technology level you'd see how privacy is factored in from the bottom up

If we could take an example of your phone, create an experience out there where the Apple phone is used for a fingerprint to unlock that experience. That's an important part of it. And there's a robust security architecture behind it in a lot of ways. We're not capturing additional information that hasn't been captured previously to create a card. In fact we have to capture that information from a regulatory requirement.

Institutions have to know their customer, they have to have customer security foremost in transferring information. In the best case we end up with solutions that are better than what we had before because we know who the new card went to, it is more secure.

Visa has a very important role working with regulators. It's a critical part of our business. It would be very difficult for 16000 financial institutions to each have one off conversations about payment trends and that's our job. We can bring in experts, standards. For example, with the QR Code payment for tuk-tuks in India, we worked with the Reserve Bank of India on standards. Then that standard can be used more widely.

AC: What about cryptocurrencies?

CB: We don’t authorise and settle anything but fiat currencies. That's where we are today. So cryptocurrencies, I think we're going to continue to look at them as technologies - I think like most organisations We’re really interested in the underlying blockchain capability. It's powerful, it's fascinating and in fact Visa has opened a pilot with three or four clients and a program called B2B Connect that's based on a blockchain tech. It's a distributed ledger for money movement. So we're just starting to work with clients but for now it's fiat currency only.

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AC: A lot of what we’ve been looking at and talking about today is the future of payments, we know millennials will demand different things, but today we have ageing populations in the developed economies. Are you looking at those cohorts as well?

CB: Of course, yes, and when I describe this process of collaboration there are two steps to building a solution with clients at the centre. When we bring clients in here our work starts about six to eight weeks before our client is on the ground. We send teams into the market to do research at depth. We talked to the millennials but we talk to the older customers - we've got to collect as much information about the problem that our client wants to solve as we can. So that when we're here together we've got the full diverse needs on the table and then we get to work on solving them.

AC: You’re in Singapore, the gateway to ASEAN which is an incredibly diverse region in terms of culture and development. And you have innovation centres around the world. How do you work together?

CB: There are seven different labs. We have one at our company headquarters in San Francisco. We have certainly the lab that we saw today in Singapore. There is one in London. I think one of the thing that's interesting about the way this has been set up is that we're trying to find what is core to that particular region or that city and apply it to the lab.

For example in the London innovation centre the London Underground is sort of the gold standard in payments in public transports. And so we've made that sort of a global innovation center around transit. If you went to that you'd see different flavors of demonstrations. There is the subway, there's cars and they explore all the different relevant form factors and the technology needed for the unique needs of transit.

What you see out here is different like the tuk-tuk. The untethering of points of sale, that's moving rapidly. We're all building relative centres of expertise so that when clients say “I have this problem” we can say “OK go here we have better solutions available”.

AC: In Australia we’ve seen a really amazing take up of contactless payments, of tap’n’go, and now that’s migrating to mobile payments like Apple Pay with ANZ or payment on other devices. Where do you see the next trend?

CB:  Humans tend to move a little slower than technology but I think over the next five years we're going to continue to see shifts like this. We'll be in a world of cards with companion devices. Consumer education will have to move forward and our job at Visa is the ecosystem around these new services. We need to make sure that we assure our customers around security. It's there, stronger than ever, but we need to educate them on how the new technologies work. We need to demonstrate you can set up credentials and then push them into these devices and that device is everywhere you want it to be.

Andrew Cornell is managing editor of bluenotes