Ten years ago, when PayPal first entered the payment scene, online shopping wasn’t very popular and few even considered the idea of transferring funds to one another without the use of a checkbook. Fast forward to 2009 where 44% of U.S. consumers made at least one online person-to-person (P2P). Looking forward, analyst firm Javelin Strategy & Research predicts that more than 60 million American households will use online P2P transfers by 2014.
However, even with the massive growth of e-commerce and explosion of P2P payment needs (think eBay), PayPal remains the top player in the market and doesn’t face many competitive threats. It seems like everyone else has been slow to get on board. Most banks still require that you provide the recipient’s banking account and routing information if you want to transfer money to them – that’s a lot of personal data to share with a stranger.
Thanks to Visa’s desire to compete with PayPal, consumers will soon be able to transfer funds directly to a Visa card account. Although this service has been offered internationally for some time, this will be the first time it will be offered by a major payment network in the U.S.
Visa’s payment system will be very similar to PayPal, allowing users to enter the email address, phone number or 16-digit Visa card number of the person to whom they’re transferring funds and make the money quickly become available for the recipient to spend. However, rather than have this money go directly to the recipient’s bank account, Visa’s system will allow transfers to eligible Visa credit, debit or prepaid cards.
While Visa has consistently been a powerhouse in the retail and merchant markets, the company is now seeing the power of the individual payment markets. After all, PayPal reports that in the fourth quarter of 2010, it had 94.4 million active and registered account users. During the same quarter, the net total payment volume for PayPal reached $26.9 billion (NASDAQ).
Obviously, this is a lucrative market for Visa to enter into and one that has already taken off in Europe and Asia. Do you think Visa will be able to dethrone PayPal in this market or is it too little too late for them? Or, do you believe that we are accustomed to these payments going into a checking account and won’t be as interested in payments going to a debit/credit card?
(This information was provided by Credit-Land.com)