A few interesting takeaways I got from the article, which was also pretty light on details:
Europe only for now. Why?
Title of HN article says alternative to credit cards. But you click into the article and it says the use case is an alternative to the “traditional direct debit process” as well. Which would make more sense as an alternative than credit cards, which exist in Europe but aren’t nearly as widely used as in the States. How is this different than “direct debit”?
The article then outlines one main benefit of this is
> The service should help people deal with problems like unauthorized auto-renewals of subscriptions, by making it easier for people to reverse direct debit transactions and get their money back, Visa said.
But then immediately thereafter says this won’t apply to arguably the three most problematic and abusive bad actors in this space. Why?
> It won’t initially apply its A2A service to things like TV streaming services, gym memberships and food boxes, Visa added, but this is planned for the future.
Honestly the article left me with more questions than answers
The first one is pretty easy, it’s because direct bank payments in EU are popular with things like klarna, SEPA, etc. so they are just competing with existing players.
The card networks actually provide this service (it's called a card account updater) for a small fee to merchants/payment gateways/etc, so the ones that are transferring are doing so with your card companies help and to the card companies benefit. I wouldn't expect that to go away any time soon
That's probably not good. Getting a new card every few years lowers your exposure to fraud, as it's just a matter of time before it ends up in a card dump. The whole system is pretty terrible, but limiting the window during which fraud can occur for your card is a small mitigation.
It's crazy how paying for things in 2024 is halloween candy bowl left outside rules. How do we have anything other than "you have authorized a recurring payment to <x> of <amount> manage or cancel it <here>," it just enables this cancelling game and automatic price increase nonsense.
We wouldn't need legislation to make people stop behaving shitty if they didn't have the ability by virtue of how the system is set up.
That's how it works in the UK, all direct debits show up in your bank account and you can unilaterally cancel them and they auto-cancel if it's not been used in over a year.
You're also protected if an incorrect payment was made.
IMHO banking infra is very mature, and banking regulation helps these kind of initiatives.
Other regions might also have many innovative companies, but there's probably no central rule guaranteeing banks have an API or are interoperable at all.
> Visa’s A2A product relies on a technology called open banking, which requires lenders to provide third-party fintechs with access to consumer banking data.
> Open banking has gained popularity over the years, especially in Europe, thanks to regulatory reforms to the banking system.
They (Visa) can't see much aside from which merchant, how much and when you've paid. That's still pretty powerful metadata, but in most sane legal jurisdictions with decent PII protection statutes, they can't willy nilly go link that to your shopping receipt and break down your purchase to line items.
The vast majority of my monthly payments (by dollar amount) are actually paid via bank transfers.
People don't pay their mortgage/rent, their car payments or their utilities using their visa card.
In situations where it is possible to pay with a credit card, there is a transaction surcharge that is a multiple of any "points program" or cashback benefit.
that was exactly my point. those are the transactions the CC operators don't care about. they would be only expense for them, that's why there's always extra high fees.
they don't care about recurring payment for data they already have.
For reference to a working setup that achieves similar end goal, India has the Unified Payments Interface (UPI).[1]
It is an instant payment system as well as protocol. It is almost a decade old. The interface facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. It is used on mobile devices to instantly transfer funds between two bank accounts. The mobile number of the device is required to be registered with the bank. The UPI ID of the recipient can be used to transfer money. It runs as an open source application programming interface (API) on top of the Immediate Payment Service (IMPS),[2] and is regulated by the Reserve Bank of India (RBI).[3]
Before UPI, I remember using something from Google called "Tej"[4] which later (I think) became what Google Wallet, then Google Pay using the current UPI protocol. The only thing I remember about the early development of UPI is that I saw an office in Bangalore earmarked for UPI team (must be one of many). I used to consult for a pretty big Indian Brand to help with one of their eCommerce product. That team had an office in that same building, and the UPI team's security was pretty tied. From the talks I hear, I assume they were mostly QA people. This was 2015.
The US technically has FedNow, though I'm not sure anyone has implemented it yet. Given that it's going to absolutely destroy the ACH racket of "we borrow your money for 3-5 business days for each transfer you make", and that the only serious US alternative is debit cards transfers (which Visa profits from today, although at only 0.05%), I assume they're not prepared to kill the golden debit goose until they've got their ACH competitor built out somewhere they aren't making debit money from today.
And yet somehow, certain ACH payments are "almost" instantenous.
I have automatic transfer of my PayPal balance (to my bank) set up (most of my income arrives via PayPal). Since I did this, the payment is in my bank account the next day, using the amount in the account within a minute or two of midnight.
There's also Zelle, which seems to be slowly spreading (with the emphasis on "slow" - its adoption rate seems far behind Venmo at the same point in Venmo's life).
> Zelle (/zɛl/) is a United States–based digital payments network run by a private financial services company owned by the banks Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo.
How do banks offer credit cards with 0.3% interchange? Do they charge an annual fee? If you have the standard 30 day bill cycle + 30 days to pay, thats is upwards of 60 days for an interest free loan to the customer.
Someone needs to pay for those 50k airline miles if you sign up for a new card. And when interchange is that low, there’s no margin left for bank to offer (pay for) loyalty points.
That would be true if all credit card customers pay their monthly bills in full, every month.
However, that is not the world we live in. Most people carry balances a majority of the time, with interest rates significantly above "the cost of money".
Further, the banks (really: card issuers) (in the US, at least), are collecting 0.5-4% of all transactions as fees.
We have the same caps, and in the UK we have cards with 12+ months interest free. They do sometimes have small annual fees but nothing like the bank rate.
My understanding is that it's a bit like bank accounts, it's paid for by people who don't pay their entire bill and take the high APR, leave a large balance after the intro period, etc.
Basically, if you do it right, you win, if you do it wrong, you lose and often big.
Account-to-account payments have been available in Europe for a long time, but what’s missing is a dispute/fraud management framework. (Credit transfers have ~100% sender liability; direct debits have ~100% merchant liability.)
If that’s what’s Visa is adding, this could be interesting for some use cases.
Who pays to run the dispute system? Sender or receiver is going to be paying money. For things like rent/mortgage or other large payments, no one is going to pay a fee.
Rent and mortgage payments don't require trust in the way that buying things online at an unknown merchant does.
In both cases, the lender/landlord has already taken a risk, and the borrower/tenant defaulting on a payment can't be mitigated via the payment rails by definition.
Something that I read between the lines here is that credit/debit card is basically still the only practical way to do transactions in the USA. Is that right?
It isn't the same across all of the Europe, but in the most cases you don't have to use a card to make a transaction, there usually already is one or multiple options to pay-by-bank online. So my understanding is Visa is just making an alternative of their own, nothing truly new.
For p2p transactions (like, between friends) there are also multiple options, and they usually don't involve a card number (in fact, I don't even really know the mechanics of how such transactions happen, where they happen). Most people living in the same region usually have accounts in the same bank. Probably, the most widespread is Revolut, which will allow you to make a QR code to request a payment, or send money directly, but most "traditional" banks I know are not that far from newer Fintech capabilities, really: you still have an option to make a special URL to request a payment in your banking app, and "sending money to a phone number" is popular option too.
Direct bank-to-bank transfers for peers usually have a (fairly low) price tag, but are nearly instant too.
The UK already has Faster Payments and much of the EU has SEPA with an "instant" option. There are already processors who will let you leverage these options (eg GoCardless) with very low processing fees and many banks are trying to expose payment endpoints.
I don't think we should welcome stepping back to having another middleman involved in the process. What's their value-add? Are they going to be the insurance in fraud, offer chargebacks?
Exactly -- Visa wants a piece of the pie, and are probably worried about these services becoming ever-easier to use (smartphones etc) at the expense of credit/debit cards.
Yes, but there’s no dispute resolution framework for it, so it’s only used between trusted parties. There’s a big gap for ecommerce there:
I’d never send money to an unknown merchant because I have no idea if they’re real, they will go bankrupt etc., and a merchant will never accept a direct debit from an unknown customer because they can reverse that with the click of a button without any justification.
Not sure about that. When I was living in Estonia, I paid for half of the things using bank transfer, from mobile phone bills to random online purchases.
Interesting, do you know how people deal with merchants not delivering goods/services, just ceasing to exist etc.?
Anything postpaid, such as mobile phone bills, are usually fine, since the service has already been provided, so the customer is only settling a debt.
I also generally have no issues pre-paying money via SEPA credit transfer to a merchant I've already successfully transacted with before, unless it's something bankruptcy-prone such as an airline, a contractor, a small online merchant etc. – many people have been bitten that way.
You either buy small change stuff locally or from a physiCal shop for large purchases.
Rest purchases are done on Amazon et al.
On off merchants are dime a dozen here so that problem reallly doesn't arise.
A family member recently made a bank transfer and got one digit wrong. We approached the bank. The refused to help since "the transaction was done intentionally and not due to hacking or similar thing) but they gave contact of the wrong recipient. We approached them and had them reverse it manually.
Point is, you say an airline. They dont really go backrupt left and right all of a sudden.
We make air tickets a week or two weeks at best before travel. Same for small online merchants. They really dont exist that much because amazon
> Point is, you say an airline. They dont really go backrupt left and right all of a sudden.
It's not that uncommon really, and it's usually a situation in which the last thing travelers need is having to worry about whether they'll have to pay their (usually much more expensive) replacement tickets completely out of pocket.
> Rest purchases are done on Amazon et al.
That sounds like a significant market inhibition mechanism then. One of the great advantages of the card chargeback mechanism is that it makes consumers much more willing to give new, smaller merchants a chance, because they know they can always get their money back if they don't deliver.
Pre-payments only massively benefit encumbents, which is ultimately bad for competition and by extension prices.
> A family member recently made a bank transfer and got one digit wrong. We approached the bank. The refused to help since "the transaction was done intentionally and not due to hacking or similar thing) but they gave contact of the wrong recipient. We approached them and had them reverse it manually.
In SEPA, this only works if the funds are still there at the recipient's account, and even then the receiving bank has to consent to the reversal. In case of a fraudulent recipient, the chances of this working are almost zero (as fraudsters usually send the money onwards as quickly as possible).
Market inhibition is why govt is launching ondc. Look it up. Its federated online ecommerce.
So hopefully that will improve the game and incumbents wont tower over the market.
ONDC does seem to add dispute resolution, which is exactly what's missing from "pure" SEPA credit transfer or direct debit to make it viable for untrusted online purchases.
I'm not sure about credit transfers (and things like Klarna / GoCardless), but with SEPA direct debit you supposedly can reverse any payment within 60 days, no questions asked. Though this brings the problem the other way around – now it’s the merchant who has to trust you!
Exactly: For the same reason that consumers are unlikely to be comfortable sending a credit transfer to an untrusted merchant, merchants are unlikely to accept direct debits from untrusted consumer.
I believe that can be compared to BLIK in Poland, which offers that but already has very wide adoption locally. To the point that you can use it for phone to phone transfers, online payments and even paying directly in card terminals for cashless payments on every store (terminals are very widely adopted here) or ATM withdrawals.
I guess Visa could try to be the first one to offer similar but truly worldwide.
Bitcoin didn't invent faster transactions, nor does it do a particularly good job of it if your goal is low fees or transfer times on the order of a few minutes or less.
Europe only for now. Why?
Title of HN article says alternative to credit cards. But you click into the article and it says the use case is an alternative to the “traditional direct debit process” as well. Which would make more sense as an alternative than credit cards, which exist in Europe but aren’t nearly as widely used as in the States. How is this different than “direct debit”?
The article then outlines one main benefit of this is
> The service should help people deal with problems like unauthorized auto-renewals of subscriptions, by making it easier for people to reverse direct debit transactions and get their money back, Visa said.
But then immediately thereafter says this won’t apply to arguably the three most problematic and abusive bad actors in this space. Why?
> It won’t initially apply its A2A service to things like TV streaming services, gym memberships and food boxes, Visa added, but this is planned for the future.
Honestly the article left me with more questions than answers
I wish I could just autoflag anything that is set to survive a credit card number change as fraud.
Consider yourself lucky.
We wouldn't need legislation to make people stop behaving shitty if they didn't have the ability by virtue of how the system is set up.
You're also protected if an incorrect payment was made.
No idea why not every country has this.
IMHO banking infra is very mature, and banking regulation helps these kind of initiatives.
Other regions might also have many innovative companies, but there's probably no central rule guaranteeing banks have an API or are interoperable at all.
> Visa’s A2A product relies on a technology called open banking, which requires lenders to provide third-party fintechs with access to consumer banking data.
> Open banking has gained popularity over the years, especially in Europe, thanks to regulatory reforms to the banking system.
In the US there are plenty of bills paid via direct bank payment (bank id + account number) and I don't think visa can see that data.
But with this scheme they would have a more complete picture for every cardholder.
Additionally, there might be a transaction fee (smaller than a credit/debit card?)
also your water and power payments mean very little too them. they already have your zip code, and all your app and food and store purchases
People don't pay their mortgage/rent, their car payments or their utilities using their visa card.
In situations where it is possible to pay with a credit card, there is a transaction surcharge that is a multiple of any "points program" or cashback benefit.
they don't care about recurring payment for data they already have.
It is an instant payment system as well as protocol. It is almost a decade old. The interface facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. It is used on mobile devices to instantly transfer funds between two bank accounts. The mobile number of the device is required to be registered with the bank. The UPI ID of the recipient can be used to transfer money. It runs as an open source application programming interface (API) on top of the Immediate Payment Service (IMPS),[2] and is regulated by the Reserve Bank of India (RBI).[3]
Before UPI, I remember using something from Google called "Tej"[4] which later (I think) became what Google Wallet, then Google Pay using the current UPI protocol. The only thing I remember about the early development of UPI is that I saw an office in Bangalore earmarked for UPI team (must be one of many). I used to consult for a pretty big Indian Brand to help with one of their eCommerce product. That team had an office in that same building, and the UPI team's security was pretty tied. From the talks I hear, I assume they were mostly QA people. This was 2015.
1. https://en.wikipedia.org/wiki/Unified_Payments_Interface
2. https://en.wikipedia.org/wiki/Immediate_Payment_Service
3. https://en.wikipedia.org/wiki/Reserve_Bank_of_India
4. https://blog.google/around-the-globe/google-asia/introducing...
I have automatic transfer of my PayPal balance (to my bank) set up (most of my income arrives via PayPal). Since I did this, the payment is in my bank account the next day, using the amount in the account within a minute or two of midnight.
There's also Zelle, which seems to be slowly spreading (with the emphasis on "slow" - its adoption rate seems far behind Venmo at the same point in Venmo's life).
Wikipedia says
> Zelle (/zɛl/) is a United States–based digital payments network run by a private financial services company owned by the banks Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo.
https://en.wikipedia.org/wiki/Zelle
0.2% (20bps) for debit
0.3% (30bps) for credit
https://ec.europa.eu/commission/presscorner/detail/fr/MEMO_1...
The return on investment for this money spent lobbying in the USA is astronomical.
The biggest difference is no loyalty points.
Someone needs to pay for those 50k airline miles if you sign up for a new card. And when interchange is that low, there’s no margin left for bank to offer (pay for) loyalty points.
However, that is not the world we live in. Most people carry balances a majority of the time, with interest rates significantly above "the cost of money".
Further, the banks (really: card issuers) (in the US, at least), are collecting 0.5-4% of all transactions as fees.
My understanding is that it's a bit like bank accounts, it's paid for by people who don't pay their entire bill and take the high APR, leave a large balance after the intro period, etc.
Basically, if you do it right, you win, if you do it wrong, you lose and often big.
https://www.adyen.com/knowledge-hub/interchange-fees-explain...
If that’s what’s Visa is adding, this could be interesting for some use cases.
In both cases, the lender/landlord has already taken a risk, and the borrower/tenant defaulting on a payment can't be mitigated via the payment rails by definition.
It isn't the same across all of the Europe, but in the most cases you don't have to use a card to make a transaction, there usually already is one or multiple options to pay-by-bank online. So my understanding is Visa is just making an alternative of their own, nothing truly new.
For p2p transactions (like, between friends) there are also multiple options, and they usually don't involve a card number (in fact, I don't even really know the mechanics of how such transactions happen, where they happen). Most people living in the same region usually have accounts in the same bank. Probably, the most widespread is Revolut, which will allow you to make a QR code to request a payment, or send money directly, but most "traditional" banks I know are not that far from newer Fintech capabilities, really: you still have an option to make a special URL to request a payment in your banking app, and "sending money to a phone number" is popular option too.
Direct bank-to-bank transfers for peers usually have a (fairly low) price tag, but are nearly instant too.
So, how do people exchange money in the USA?
I don't think we should welcome stepping back to having another middleman involved in the process. What's their value-add? Are they going to be the insurance in fraud, offer chargebacks?
Thats what would make sense to me, anyway.
I thought Europe already had easy interbank payments?
I’d never send money to an unknown merchant because I have no idea if they’re real, they will go bankrupt etc., and a merchant will never accept a direct debit from an unknown customer because they can reverse that with the click of a button without any justification.
Not sure about that. When I was living in Estonia, I paid for half of the things using bank transfer, from mobile phone bills to random online purchases.
Anything postpaid, such as mobile phone bills, are usually fine, since the service has already been provided, so the customer is only settling a debt.
I also generally have no issues pre-paying money via SEPA credit transfer to a merchant I've already successfully transacted with before, unless it's something bankruptcy-prone such as an airline, a contractor, a small online merchant etc. – many people have been bitten that way.
You either buy small change stuff locally or from a physiCal shop for large purchases.
Rest purchases are done on Amazon et al.
On off merchants are dime a dozen here so that problem reallly doesn't arise.
A family member recently made a bank transfer and got one digit wrong. We approached the bank. The refused to help since "the transaction was done intentionally and not due to hacking or similar thing) but they gave contact of the wrong recipient. We approached them and had them reverse it manually.
Point is, you say an airline. They dont really go backrupt left and right all of a sudden.
We make air tickets a week or two weeks at best before travel. Same for small online merchants. They really dont exist that much because amazon
It's not that uncommon really, and it's usually a situation in which the last thing travelers need is having to worry about whether they'll have to pay their (usually much more expensive) replacement tickets completely out of pocket.
> Rest purchases are done on Amazon et al.
That sounds like a significant market inhibition mechanism then. One of the great advantages of the card chargeback mechanism is that it makes consumers much more willing to give new, smaller merchants a chance, because they know they can always get their money back if they don't deliver.
Pre-payments only massively benefit encumbents, which is ultimately bad for competition and by extension prices.
> A family member recently made a bank transfer and got one digit wrong. We approached the bank. The refused to help since "the transaction was done intentionally and not due to hacking or similar thing) but they gave contact of the wrong recipient. We approached them and had them reverse it manually.
In SEPA, this only works if the funds are still there at the recipient's account, and even then the receiving bank has to consent to the reversal. In case of a fraudulent recipient, the chances of this working are almost zero (as fraudsters usually send the money onwards as quickly as possible).
ONDC does seem to add dispute resolution, which is exactly what's missing from "pure" SEPA credit transfer or direct debit to make it viable for untrusted online purchases.
I've in the meantime found the actual Visa press release (TFA is pretty light on details), and their A2A solution does seem to add just that as well: https://www.visa.co.uk/about-visa/newsroom/press-releases.33...
Seems fine, but why not use a credit card?
I wonder what the fees will be?
I guess Visa could try to be the first one to offer similar but truly worldwide.