Ruben Salazar, senior vice president and global head of Visa Direct, told Karen Webster that the transition from traditional, ACH transactions toward faster payments is underway — but is not without its frictions.
More than 100 countries have launched, or are in the process of launching, instant payments rails.
But the challenge of getting to ubiquity lies with interoperability so that 9 billion individuals — senders and receivers — no matter where they are, can move money seamlessly.
“Instant payment solutions, payment rails and new payment use cases will have to have a consumer-centric approach, otherwise adoption will be difficult to attain,” he said during an interview as part of the “What’s Next in Payments: Instant Payments: What Will Turbocharge Instant Payments Growth in 2024” series.
The certainty of knowing that the person you’re sending money to is part of the same network and thus the transaction will go through is easier said than done, noted Salazar.
The instant payment infrastructures that have been developed in each domestic market are operating in isolation, in many cases, from the other payment networks that exist in the same markets, he said. The card networks, banking payments and ACH conduits are not linked to faster payment rails, which in turn creates friction for consumers.
Complexities are compounded when it comes to cross-border fund flows.
“There are very few cross-border transactions that are happening in real time,” said Salazar, due to a range of additional considerations and operational add-ons that must take place, tied to each country’s anti-money laundering (AML) and know your customer (KYC) policies, sanctions screenings and the ever-present need for currency and foreign exchange (FX) solutions in the back office.
But, he added, with better and more robust data exchanges, there’s a natural progression underway toward faster and more efficient payments ecosystems.
The most important adoption driver for instant payments on a technical level, said Salazar, will be application programming interfaces (APIs) and the open innovation architecture that can connect consumers and businesses point by point across a uniform and standardized rail linking disparate instant payment systems together.
“Then, you’ll see participants develop new use cases and monetize them for use on top of this rail,” he said.
Visa’s efforts, via Visa Direct, have made headway in forging that connectivity, with more than 65 use cases already in play and the ability to reach more than 8.5 billion endpoints. The payment network has developed, with partners, aliases and directories that allow instant access to sender and receiver bank accounts by linking to emails or mobile devices — even nicknames.
“The alias is connected to multiple payment capabilities or credentials and … connect one network to another network to facilitate [faster] transactions,” he said.
Although the current Visa Alias Directory service efforts are mainly used in domestic environments, the company is also working with partners to bring the alias-based model to cross-border settings, in effect creating an orchestration layer for faster transactions.
Salazar pointed to the announcement this year that Visa cards could be linked to the WeChat app as an example of this seamless, digital-only functionality. After all, as he remarked to Webster, “a digital wallet is a credential … and more than 2.5 billion wallets are part of this data ecosystem that allows for this transnationality in a cross-border environment.”
Looking ahead, he said, Visa has other means to orchestrate and reach non-Visa cards in domestic and international environments with the alias directory.
“We can connect a local, instant payment in a platform,” he said. “We can connect domestic rails. We can connect any wallet that is operating in the ecosystem — and create the proper messaging, so the interoperability and interconnectivity happens.”
He said faster payments will be a catalyst for more digital inclusion, as there are still billions of unbanked individuals and households around the globe (and about 4% of households are unbanked in the United States), without debit cards, savings accounts or checking accounts.
“This is the ultimate goal as we facilitate the participation of more and more consumers and businesses in a larger, vibrant, digital economy,” he said.
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