- Card titan Visa is targeting the business-to-business and remittances markets for major growth in the future, Visa Chief Financial Officer Vasant Prabhu said at a Goldman Sachs conference last week.
- Prabhu noted the $20 trillion “cardable B2B portion” is almost as big as the company’s consumer payments business and looks a lot like it, but is growing faster. “We think there's an extraordinary opportunity for a long time,” he said of that segment of the B2B market in a webcast of the Sept. 12 Goldman Sachs Communacopia and Technology Conference.
- The company is also targeting the $800 billion remittances market, which revolves around migrants sending money cross-border to family and friends. The biggest geographic regions for that growth are in the U.S., the United Arab Emirates and Saudi Arabia due to money moving from those countries, the CFO said.
Visa isn’t the only company targeting the gigantic B2B payments and remittances markets for growth. In the B2B arena, there are a host of new entrants, such as Ramp, seeking to provide businesses with new digital tools for moving money. And when it comes to remittances, incumbents such as MoneyGram and fintechs like Remitly, are battling to win over consumers with new, faster, cheaper ways of sending money across borders.
San Francisco-based Visa sees the $120 trillion B2B market in three segments, with the two smaller parts of that being near-term opportunities, as in the next three to five years, while the biggest part of it is a longer-term proposition, Prabhu said.
The “cardable B2B payments” segment is about a $20 trillion opportunity, Prabhu said. Visa is already the largest player with $1 trillion in payments volume in that area, and is larger than two other major competitors, Prabhu said, without naming those rivals. Visa’s focus in building this business is in the U.S. for now because that’s currently where most of the flow is, he noted.
In the $10 trillion cross-border segment of B2B, Swift is the biggest player, but there is “a tremendous amount of dissatisfaction” with speed and reliability, Prabhu explained. So Visa sees an opening to solve those problems, but it’s still in the process of building out its nodes for the network, he said. The company is now in 100 countries.
Finally, he noted that the lion’s share of the B2B market is in accounts receivable and accounts payable. Visa is in that market, too, but expanding there is a longer-range goal, Prabhu said.
In remittances, Visa was reluctant to get into the market in the past, but not anymore. “It’s one of the markets that we think can be an extraordinarily big opportunity for us,” Prabhu said at the conference. “We never participated in remittances, for a whole host of reasons,” he explained, noting it was complicated by being a cash business and was difficult with respect to anti-money-laundering and know-your-customer concerns.
The World Bank predicts the payment flow in remittances will continue to grow. It forecast a 3.7% increase this year to $802 billion in transfers compared to last year.
Visa is focused on how it can improve the market for prospective customers. The market has lots of problems because “it’s inefficient, it’s expensive, it's slow,” Prabhu said. “There are a variety of other concerns governments had about it — it was unsafe for the people when they went to collect their money in some of these locations,” he said. “We can solve all those problems.”
Visa offers services where it’s possible to use a debit or credit card from home or on a mobile device to initiate a payment that can be sent to a person, for instance, in Mexico. That recipient can get it on a debit, prepaid or reloadable card and doesn’t have to go to an agent to collect the money, the CFO explained.
“It’s instantaneous, it’s reliable, it’s secure,” Prabhu said, noting it’s also “dramatically cheaper.”
With incumbents seeing Visa present increased competition in the money transfer arena, they’re locking arms with the card giant to offer new approaches to remittances. For instance, Visa and Western Union said in August that they were building their partnership to add more options in six countries, tapping the card company’s Visa Direct services for the upgrades.
“This (remittances market) will grow for a long time,” Prabhu predicted.