Visa Inc. is stepping up its money transfer operations in the U.S. after pushing the technology abroad for several years.
The San Francisco payments company has announced two deals in as many weeks with financial companies that will let U.S. consumers initiate international remittances through its network.
To further bolster the reach of the Visa Money Transfer service, it is mandating that U.S. issuers be able to receive money transfers in the next year, a requirement that has been in place for issuers in other countries since 2007.
Visa's transfer push makes sense, analysts said, because it can boost payments volume using systems that are already in operation, and because these are initiatives it can pursue on its own rather than wait for its issuers to take the lead.
"Visa Money Transfer is all about taking advantage of and building upon the network that Visa already has in place," said Kelly Alpert, the head of global money transfer at Visa.
Global remittances are expected to grow in the coming years, and Alpert said Visa could be an attractive partner for banks that want to get into the market while minimizing the costs of developing a service in-house.
Visa said Tuesday that it signed Bancomer Transfer Services Inc. of Mexico as its second U.S. partner for Visa Money Transfer, allowing customers to send funds from Bancomer retail locations directly to Visa credit, debit or prepaid accounts overseas.
Bancomer, a subsidiary of Banco Bilbao Vizcaya Argentaria SA of Spain, is initially enabling transfers to Visa customers in Brazil, El Salvador, China and the Philippines. Eventually, people will be able to send money to cardholders in nearly every country. (For compliance reasons, the service cannot send funds to anonymous prepaid accounts, only to accounts registered in the cardholder's name.)
Earlier this month Visa announced a similar partnership with MoneyGram International Inc. The Minneapolis money transfer company is allowing customers to initiate cash remittances from most of its U.S. retail locations to Visa credit and debit cardholders in Guatemala, through a partnership with Banco Industrial, a Guatemalan financial company.
Improved economic conditions are expected to increase remittance volumes in the coming years following a projected dip in 2009. Global remittances were expected to reach $374 billion this year, an almost 33% jump from 2005 levels, according to Aite Group LLC. Data for full-year 2009 was not available.
Many U.S. banks have tried unsuccessfully to compete with established money transfer organizations such as MoneyGram and Western Union Co., only to be saddled with high development and regulatory costs.
The ability to leverage the global reach of an existing network like Visa's could help banks and other companies more quickly roll out a service to a broad audience without taking on all risk, said Gwenn Bezard, a research director who covers money transfers for Aite Group.
"Some banks have tried to do it in-house, and now they realize they cannot do it on their own," he said. "This is truly an international product, and it's very hard to do it without a strong partner."
Furthermore, banks "have been squeezed" by the financial crisis and new regulations that are "dramatically affecting many sources of revenue," he said.
"A lot of banks are really waking up to the need to develop new products and new services to drive fee income, in particular," Bezard said. "Money transfer is not the only answer to that, but it's one of the ancillary products that banks can push."
The cost to Visa is less because it can use the "same infrastructure" to "move money to a consumer's Visa account," Alpert said.
Visa's foray into the remittance business is not new.
It has had the ability to transfer funds directly to cardholder accounts since 2002, and the service debuted in 2003 in Ukraine. It has since added about 50 transfer partners internationally, though MoneyGram and Bancomer are its first U.S. customers.
"We are pretty consistently hearing from our large financial institution customers that they are very interested in getting into the remittances space, whether that be enabling their customers to easily send money to consumers outside of the U.S. or even allowing their customers in the U.S. to send to other people within the U.S.," Alpert said. BBVA did not respond to calls or an e-mail Tuesday.
"Since they have become a publicly traded company, I think [Visa] has become a lot more aggressive in pushing, promoting and marketing new payment products that piggyback on the Visa network," Bezard said. "Visa can no longer sit back and let the issuers drive the show."
Visa is also pushing its transfer service for domestic, person-to-person payments. It is requiring that by October its U.S. issuers be able to receive payments sent from either inside or outside the U.S. for their debit and prepaid cardholders, Alpert said. They also will be required to receive payments for their credit-card holders in the next 12 months, she said.
The success of a money transfer service lies partly in the ability of senders to reach a wide number of recipients. "It's a more complicated message if you have to say, 'You can send money to a Visa cardholder but only if the bank is participating in receiving the transaction,' " Alpert said.
