There are many fascinating slices of Fintech, but at the moment, none seem more energized than the payments space. For the last half-decade, Fintechs have entered the market with debit because of the much lower barrier to entry. But in the last two years, a few of the incumbent players in the payments space have built programs to make it easier for disruptive Fintechs to launch innovative products in credit. It’s begun to change the way credit can function within the market.
One such program is Visa’s Fintech Fast Track program, which helps Fintechs quickly launch payments programs through vetted enablement partners including processors, bank sponsors, program managers, and other experts across compliance, KYC, and other areas. Terry Angelos, SVP and Global Head of Fintech at Visa, has helped build and launch the program which has grown 360% year-over-year and now includes hundreds of participating companies across the globe. He has a nearly unprecedented view into the innovation happening within the Fintech payment space. Recently, he worked with Unifimoney to launch our ocean-bound plastic Visa card.
We gave Angelos a call to learn more about the most exciting changes he’s seen in the payment space and how a traditional player like Visa has adapted to become a partner to Fintechs.
Fintech is a really important category for us. If you look at Visa today, we have about $9 trillion in payment volume on Visa, and cash alone is double that at about $18 trillion. If you look in the B2B area, there's about $120 trillion of analog B2B payments: check, wire, ACH. We think a significant chunk of that — probably about $20 trillion — is well suited to digital-payment rails such as Visa. There are payment flows today that don't run on Visa, and Fintechs are the partners that are helping us access some of those new payment flows.
For example, there are Fintechs that are digitizing cash. If you are in Argentina, and you want to subscribe to Spotify, it's hard to do that with cash. So, we have neobanks in those markets that are really focused on helping people who don't have a bank account to create one, and then link their account to a payment credential so they can then make a payment. That's happening everywhere in the world. So, our focus on Fintechs is very much a way to expand the payment flows that Visa is part of today.
Let's also take a look at embedded payments inside of businesses. We work with Fintechs that are focused on virtual card payments inside of businesses. If you and I were to start a business tomorrow, we probably would make payments on our Visa card for a while. But by the time we were 100 employees, we'd hit a point where we’d bring in a controller and have to create an invoice in order to get payments approved — eventually, it becomes too hard to manage who's making what payments. So, we're seeing a number of Fintechs find a way to put those controls in place by using a digital payment method. Companies like Airbase, which does spend management, and companies like Ramp or Divvy who do something similar.
Another place to look at is the earned wage access space. There is a $100 billion a week in earned but unpaid wages and a big chunk of that is beginning to be paid out in real time. That's happening over Visa rails through the integration of something called Visa Direct, Visa’s real-time push payments platform.
Then you have digital wallets. Take a company like M-Pesa in Kenya. That's a closed loop digital payment system, where you use cash to fund your M-Pesa balance, and you can use your M-Pesa balance to make certain purchases. Those digital wallets are adding a Visa credential, so that now you can travel outside of your home country or go to an online retailer and your M-Pesa balance. Visa is allowing you to draw funds out of a previously closed-loop wallet.
So, why are those use cases so exciting to us? Well, the biggest realization that we've come to is that we’re actually adding thousands of new companies into the payment ecosystem. These are entrepreneurs who may have terrific domain expertise in one area and are deciding to launch a neobank, a crypto wallet, or a lending service. But in order to do that, you actually need to put together a payment stack. So, we spend a lot of time helping companies put together that payment stack with the help of trusted partners. The biggest effort we've made programmatically is through our Fast Track program. Fast Track is a program geared towards Fintechs. It offers tremendous value to both established companies and startups just getting started, by providing a set of approved and certified partners who can help companies launch, including issuer processors, bank sponsors, KYC vendors, and PCI compliance companies. We also offer education tools and resources for companies to help them accelerate their time to market, and the best part is that everything is available online.
In the last 18-months, the program has really grown and is now available in every region around the globe. It’s proven that there is a strong demand for companies to have a path to onboard into the payment ecosystem. In the case of Unifimoney, you guys had a lot of built-in payment expertise. But even then, it's kind of complicated how you put the whole stack together. So, that's a big part of what Fast Track is trying to do.
Great question! One of the great things about working with Fintechs is they are always on the cutting edge and thinking ahead. There was a small startup who just asked directly: why can't I design my card online? Now, traditionally, if you wanted to design a card, you would have to have a relationship with a bank sponsor in the US, and they would have to access our template, usually in PDF form. Then you could iterate, based on the rules laid out on a long document where we set standards for how cards should work functionally, as well as other elements on the card. But now you can go to partner.visa.com and literally go and design a card, according to all of the rules that we have, which vary by region. We put all the elements together, so you can have a card design that is unique to you, and also conforms to the standards that we set.
In recent years, we've found that technology is the best way to keep our high standards while managing a number of really important standards around card design. So we built a configuration engine that embodies them, rather than rely on phone calls to people who have to answer: is this the right card design or not? That's one example of leveraging what I'd say is the best of Visa — incredibly well-thought-out and stringent standards — by using technology to make it available in a democratic, simple, easy way.
I don't know that I have any special crystal ball in which to see the largest opportunities. But I do think it's clear that credit as a category has been an area where there's been much less innovation than debit. We've seen a lot more Fintechs launch on debit first, for a variety of reasons, but we are just starting to see a lot more interest from Fintechs in rethinking the credit card experience. That is going to be beneficial to consumers, to banks, and to merchants.
Companies like Unifimoney and others are rethinking not just the experience, but the way that credit is actually delivered. And there's a bunch of stuff that is really interesting in that space. Look at a company like Upgrade, who has created a credit card against the personal loans. Instead of a revolving balance, it's more of an installment plan. You have a company like Step who is focused on building credit for teens.
In the US, affluent credit is a very large category. That’s why we're very excited to see what you guys do and how the experience changes or how your product will be different than what's on the market today. We're very excited to support you guys on that journey.
One of the great things about Visa is that we are a network rail upon which others are building solutions. We're successful because we make it easy to integrate with that rail and we've made sure that that rail is super secure, efficient, and fast and that it supports new types of payment options. So, in a really pure way, we're supporting the innovation that's happening. That innovation is happening in the Fintech ecosystem — where Fintechs are challenging all aspects of financial services — but it's also happening from traditional players. If you look at some of the digital banking apps from our largest banks, they're really good. So, the table stakes now have been moved to a digital-first experience.
The way we think about the world is just to always be the best payment rail possible and then encourage developers and ecosystem participants to build on our rails. And that's what's happening and we're seeing lots and lots of innovation as companies create new business models and route payment flows in different ways that previously didn't run on our rails.
[laughs] There's a lot of innovation out there that I think is super clever. But as you know, building a business on top of a great idea is still very, very difficult.
The area where I think entrepreneurs have been particularly smart has been innovating around the idea of decoupling credit from a credit card in all sorts of ways. It's been a very successful value proposition and, in many ways, has expanded the pool of credit. People still use their credit cards in a traditional way, but debit transactions or transactions that would normally have been unfunded are now being funded. And that's a really good innovation.
The “buying now, pay later” space is another fascinating idea. It involves economics from the merchant as well, in many cases, because the merchant is participating and helping with the funding of that purchase now that there's an increase in conversion rate at the point of sale. That just doesn't happen with a traditional revolving card. So, yeah, what Max Levchin has done with Affirm, and what others have done with Klarna and Afterpay has been really inspiring to watch. I can’t wait to see where that market can go.
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