I don’t view it as payment system player. We at Visa won’t process transactions that are cryptocurrency-based. We will only process fiat currency-based transactions. My take is that bitcoin is much more today a commodity that somebody could invest in; and honestly, somewhat of a speculative commodity.
Is Visa then looking at Ripple, another cryptocurrency solution, or working on building their own in-house blockchain system? They are not only working on their own, they are gaining some market traction. If you saw their job posting a few days ago for a blockchain engineer you could have gotten excited about the Ripple mention. Check out the job description and responsibilities:
We are working on Blockchain technology and want to add a highly motivated Engineer to our team in Foster City,CA. Work on emerging technologies, partnering with Product on implementation strategy.Work with technology teams to understand the business demand and ensure design and build of solutions creates or leverages cross-asset concepts and frameworks.
We’re seeking a strong developer experienced with Ethereum and blockchain architecture to be a part of team tasked with building distributed application. Our ideal candidate has built and released distributed applications, has worked with the Ripple, R3, Ethereum and/or Bitcoin blockchain, and has experience with Solidity.
Later in the job description, they note: Candidate will be working in VISA Global Commercial Payments area, the team will be building a new payment rail leveraging Blockchain technology and distributed ledger, project details can be found here.
What this engineer is expected to do is work on Visa’s B2B Connect Solution. You can read their press release from waaaaaay back in 2016 here. It’s important to note the vision they identified in 2016:
Visa is working with Chain to build Visa B2B Connect using Chain Core, an enterprise blockchain infrastructure that facilitates financial transactions on scalable, private blockchain networks. Building on this technology, Visa is developing a new near real-time transaction system designed for the exchange of high-value international payments between participating banks on behalf of their corporate clients. Managed by Visa end-to-end, Visa B2B Connect will facilitate a consistent process to manage settlement through Visa’s standard practices.
With Visa B2B Connect, Visa aims to significantly improve the way international B2B payments are made today by offering clear costs, improved delivery time and visibility into the transaction process – ultimately reducing the investment and resources required by banks and their corporate clients to send and receive business payments.
Visa B2B Connect, which Visa plans to pilot in 2017, is designed to improve B2B payments by providing a system that is:
- Predictable and transparent: Banks and their corporate clients receive near real-time notification and finality of payment
- Secure: Signed and cryptographically linked transactions are designed to ensure an immutable system of record
- Trusted: All parties in the network are known participants on a permissioned private blockchain architecture that is operated by Visa
Searching Google News for “visa ‘b2b connect'” you’ll find a bunch of articles like Visa Spreads B2B Payments Focus Through LatAm With NovoPay and Visa Adds More Banks To B2B Connect Network.
The more you read the more it becomes clear that Visa’s solution, B2B Connect, is what they are working on and what they are taking to market. And they are gaining traction. Take this update from the Visa Add More Banks article linked above:
“Today, making cross-border corporate payments can be a cumbersome, lengthy and friction-filled process for financial institutions and their corporate clients. Using technology based on blockchain architecture, Visa B2B Connect simplifies this process by sending transactions over Visa’s network from the bank of origin directly to the recipient bank,” Visa said in the press release, noting that as it brings new cross-border solutions to market, it will focus on security, interoperability and governance. What’s more, its open APIs will enable developers to take Visa’s capabilities and build on them to quickly bring products to market. As a result, Visa said, the company has designed B2B Connect with an “API first” strategy.
Visa is a Ripple competitor for cross-border CORPORATE payments. Companies like MoneyGram who work with hundreds of thousands of independent agents may find more value in a Ripple service but Visa’s API into their own offering could potentially enable similar blockchain offerings.
If you were in charge of a large company’s cross-border transactions, selecting a Visa service is probably low-risk. Hell, your company probably already has deep, existing business ties with Visa already. To cut past these switching costs, a Ripple-solution would have to be much more compelling to take on risks for selecting a startup company’s platform. Fortunately, companies can and do run pilots to compare but not all have the capacity to run multiple pilots for extended periods of time.
My guess is a certain part of the market will just go with Visa. I am hopeful there is room for Ripple but I don’t think Visa is looking at using Ripple, at least not yet, and is actively strategizing how their own offering will become the cross-border transfer de facto standard.
This situation reminds me of lecture in business school years ago. My professor noted that very few large companies transition to the next big thing. We had companies buying land which had the best ponds that froze over…and then sold the ice. These companies never transitioned to the large refrigeration companies who made ice and took over that industry. These companies never transitioned to the home refrigeration companies who empowered families to have their own refrigeration. And this story is replayed time and time again across industry after industry.
Visa has the advantages and is gaining traction. But there is room for Ripple, and if history plays out, Ripple could very well transition to the next big thing leaving Visa’s offering behind.
If you are interested in reading more about Visa’s development partner, check them out at Chain. Chain is a San Francisco based technology company on a mission to enable a smarter and more connected financial system. They claim to build the cryptographic ledgers that underpin breakthrough financial products and services.