Visa’s blockchain endeavors seem to never end. Last week, the company posted a job announcement for a Senior Staff Software Engineer position in the company's home state, California. The Engineer will be “designing and developing secure, scalable blockchain network and micro services that is highly scalable, efficient, and extensible,” as well as researching and developing “emerging payment, Blockchain, QR Code, Virtual currency and many other emerging payment technologies.” Moreover, Visa wrote that experience with chain.com or any other enterprise blockchain platforms may be a plus.
“Working on Future of Payment research at Visa is a unique opportunity at a time when the payments industry is undergoing a digital transformation with data as a critical differentiator.”
- Visa Inc
Since Visa is not a bank, it does not issue cards, extend credit or set rates and fees for account holders. The company provides financial institutions with payment products such as Visa-branded credit, debit, commercial, prepaid, mobile, and money transfer products are a leading choice of cardholders and financial institutions in 200 countries and territories. For example, the popular US-issued bitcoin debit card, the Coinbase Shift Card is a Visa card.
The company operates a proprietary transaction processing network, called VisaNet, which facilitates authorization, clearing and settlement of payment transactions worldwide, while offering fraud protection for account holders and rapid payments for merchants.
Visa states that the network is capable of handling more than 24,000 transaction messages per second, and currently processes over 13,000 transactions per second for people and businesses worldwide, “enabling them to use digital currency instead of cash and checks.”
In its SEC Form 10-K filing in November 2015, Visa Inc highlighted how new technologies such as cryptocurrency and blockchain can have an adverse impact on its business. Other significant technologies confronting the payments industry include developments in mobile and other proximity payment methods, eCommerce, and tokenization.
“The use of our products and our revenues could decline if we cannot keep pace with rapid technological developments to provide new and innovative payment programs and services or comply with new laws and regulations...If we are unable to develop new technologies and adapt to technological changes and evolving industry standards, it could reduce the use of our products and harm our business.”
– Visa Inc
Visa is not the only company in the payments industry to recognize the threat posed by new technologies. Sequoia Fund Inc, which has owned MasterCard for nearly a decade and currently holds 4.3 percent of assets in Mastercard, warned investors against the second largest card payment network’s future performance in its 2015 annual report.
“MasterCard’s virtues are well-appreciated by the stock market but the evolution of mobile payment habits and the rise of blockchain ledger technology could pose longer term challenges to the company’s wildly profitable business model...we expect future returns will be more modest.”
- Sequoia Fund Inc
The payments industry as a whole is undergoing an evolution. At the end of 2015, Visa Europe, a wholly separate company that is currently being acquired by Visa Inc, states a shift is underway: “It’s clear that another transformation is happening. 2015 has turned blockchain into something the industry has to live with. It is no longer a choice anymore.”
Along with Visa, banks and technology firms are showing interest in adopting blockchain technology due to a potential reduction in costs, and improved product offerings. "The use of distributed ledgers has the potential to disrupt the payment industry in the near future," according to the World Payments Report 2015, a joint venture between Capgemini and The Royal Bank of Scotland plc.
“Blockchain technology has the potential to improve the efficiency of financial transactions worldwide and to transform the global financial network. The technology could accelerate the velocity of money, and provide a path for legacy banking systems to interoperate, greatly improving efficiency.”
- World Payments Report
Global market research company Euromonitor International estimates that the global consumer payment market reached US$47 trillion in 2014, which was also the first year that the share of digital payment volumes exceeded that of paper-based payment methods. According to The Nilson Report, Visa had the largest market share that year at 58 percent, by purchase transactions worldwide, while MasterCard came second at 26 percent.
Expecting to see new services and technologies for the payments industry, Visa told the SEC that they are developing and securing access to new technologies through their own initiatives as well as working with third parties, some of whom could be potential competitors. “These new services and technologies may be superior to, or render obsolete, the technologies we currently use in our products and services,” Visa disclosed.
The world’s largest payments network has indeed been investigating the use of the blockchain technology for its business. In November, Visa Inc unveiled its connected car proof-of-concept using the blockchain to record contracts such as car leasing and insurance, in partnership with DocuSign, at the Money 20/20 event in Las Vegas.
In the same month, Visa Europe announced that its new international innovation hub would launch in May 2015. Visa Europe Collab was collaborating on a remittance proof-of-concept with Epiphyte, a startup which provides instant settlement for trades and transactions using distributed ledger for the mainstream financial market.
“We’ve worked on a proof of concept with Visa Europe Collab which utilises the blockchain to facilitate international money transfers...At the end of last year, we completed the 100 day sprint project to create a prototype smartphone wallet app and a backend - built using our SaaS product - to enable the processing of remittances directly from a Visa card to a destination payment source (another Visa card, mobile phone or teller network) over the Bitcoin blockchain.”
- Edan Yago, Epiphyte CEO
In addition, the world’s largest card network has invested in a blockchain developer platform that serves an enterprise market, Chain.com. Visa, along with other investors including Nasdaq, Citi, Capital One, Fiserv and French telecom Orange invested $30 million in September 2015.
Going forward, Visa Inc expects new networks to continue to emerge, including blockchain-based networks and traditional technology-based alternative payment solutions that are spearheaded by governments, banks, regulators, and even competitors. “To successfully compete, we need to continue to ensure our network is safe, convenient, and reliable. We also need to continue to innovate in order to ensure we have the most value-added features and benefits of any network,” Visa stated in its 2015 annual report.