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Visa Inc. is continuing its push into the payments processing space, and expanding its international operations, by forming a joint venture with the Asian software vendor and processor Yalamanchili Software Exports Ltd.
Visa announced the venture, Visa Processing Service Pte. Ltd., on Tuesday. The Singapore operation was started this week with the San Francisco payments company as the controlling stakeholder.
The new company is taking over Yalamanchili's 35 processing contracts in countries including India, Singapore, Australia, and United Arab Emirates; it is to offer debit and prepaid processing services to banks, other processors, and payments companies outside the United States and Europe.
The venture is similar to Visa's debit processing service, which handles debit and prepaid processing in the United States. It will let Visa deliver these capabilities abroad more rapidly than it could by building its own system.
Visa Processing is "going to look and feel very much, functionally speaking, like [the debit processing service] outside North America," Kevin Schultz, Visa's global head of processing products, said in an interview Tuesday. "The ability to walk in with an integrated brand and processing service is a very powerful sell," he said.
Brian Riley, a research director at TowerGroup, an independent research firm owned by MasterCard Inc., said that Yalamanchili is "well versed in the Middle East and Asian markets." The joint venture gives the payments network "an interesting spin. Rather than having a U.S. product that conforms to international markets, it allows them to create a bottom-up design."
Mr. Schultz said that Visa has used Yalamanchili software for several years and will now move the software "under the Visa umbrella" as it takes over its partner's processing operations. He would not discuss the venture's financial details.
"Doing a joint venture gives us a quick entry point into the fastest- and quickly growing markets, especially in Asia," he said. Visa is now eying the processing markets in countries including Japan, Brazil, and Russia, where by itself "we couldn't have moved this quickly."
Though Visa Processing Service will initially handle debit and prepaid transactions — which are generally in higher demand, especially abroad — it will also be able to handle credit, automated teller machine, private-label, and money transfer transactions.
"Prepaid and debit, of course, are very important to us, and those will be our lead products," Mr. Schultz said. But "if you're in the issuing, process business, you have to do it all."
Observers praised Visa's decision to buy into, rather than build, a bigger international processing capability. "One of the things that Visa is striving to do, has been striving to do for a long time, is basically either replace the local networks in different countries or release a very strong competing network in any country," said Adil Moussa, an analyst at Aite Group LLC. "It just would take a lot of time to build it from scratch, so it's better to go with somebody who already has it."
Those processors are seeing additional pressure from the payments networks, both in the United States and abroad. In April, MasterCard Inc. introduced a processing system for signature debit, PIN debit, and ATM transactions, which a company spokesman called a "single, global platform" in an email Tuesday.
The system offers banks "a complete processing solution to help create differentiated products and services, enabling them to quickly expand their payments portfolios across banking channels" and "delivers multilingual and mulit-currency capabilities for debit and prepaid transactions."
