Visa's White-Label Wallet Offering Turns Banks Into App Developers

More banks are showing interest in developing their own branded mobile wallets, and Visa has launched a platform to make that possible.

Visa's service, called the Visa Digital Commerce App, allows financial institutions to offer contactless payments, security alerts, card controls and account balance information. The product is launching with more than 40 banks already signed on to use it.

"Clearly there is a desire for connected consumers to get their mobile wallet from their primary financial institution," said Todd Brockman, senior vice president of issuer processing and enablement for Visa. PNC, Webster Bank, Old National Bank and more than three dozen other financial institutions are implementing the service at launch.  

Third-party mobile wallets such as Apple Pay, Samsung Pay and Android Pay, have not provided the features or the user base that they initially expected, giving banks an opportunity to regain control of consumer spending.

By building their own mobile payment apps, banks can oversee enrollment, marketing and branding. It also enables banks to take the lead on partnerships with merchants.

More than half of consumers would prefer to use a mobile wallet provided by their bank, according to Javelin Strategy & Research. And after a slow start, people are using mobile apps to pay in stores more often, with banks being among the primary beneficiaries, according to Retale. PayPal also scores high in consumer mobile payments research, giving financial institutions a competitive reason to offer their own mobile payment service soon—and Visa more impetus to counter PayPal by enabling its issuers to be more competitive in the digital realm.

"Financial institution issuers do have some advantages and can deepen their relationships with consumers overall," Brockman said.

Some larger banks have already brought their own wallet apps to market, particularly on the Android platform, which enables third-party apps to support contactless payments.

Wells Fargo is planning to launch its own mobile payment venture this summer, and JPMorgan Chase plans a mobile wallet called Chase Pay that's built on its closed-loop ChaseNet platform. Credit Unions are also using their traditional shared resource model to build mobile wallets through consortia such as CU Wallet.

Visa's new service uses host card emulation, which enables contactless payments without requiring access to a device's secure element, and  Visa's token service, which the card network uses to protect mobile payments by substituting a replacement for the traditional account number.

The service is also designed for the Visa Developer Platform, which allows internal and external programmers to build digital commerce technology. Visa would not disclose the fee structure for its mobile wallet offering, and said the issuing financial institution decides which services to enable.

"This will help with flexibility and improve time to market," Brockman said.

Visa faces challenges with the new service, such as usability with iOS due to Apple's well-known desire to control what users can and cannot do on its platform, said Richard Crone, a payments consultant.

Notably, Apple does not support host card emulation, thus preventing third-party wallets from making contactless payments. According to Visa, this is the only feature that is absent on iOS; otherwise its technology is the same across Apple and Google devices.

"Visa is buying time to show a set of services and a sandbox that banks can play in to make their app more relevant," Crone said, adding "everything" Visa announced in its new service is available to banks from other sources, such as core banking vendors and technology startups.