Visa Flexible Credential a 'game changer'

Visa wants to become an everything network. Not just the rails over which credit and debit card transactions are routed, but all manner of payments. And the first new payment type coming out of the gate looks to be buy now, pay later (BNPL).

Visa announced U.S. availability of its Visa Flexible Credential (VFC), which supports payments from different funding sources using a single card, in collaboration with the BNPL provider Affirm, issuer of the Affirm card.

The Affirm card, used by over 1.4 million consumers, offers consumers the flexibility to pay now or over time, Visa said in a press release. It can be used at any checkout that accepts Visa.

Simultaneously, Visa is launching VFC in the United Arab Emirates with Liv Bank, that country's first digital bank, which is owned by Emirates NBD. Liv will allow consumers to access multiple currency accounts from a single card. The offering will support, at least initially, five of the most popular currencies among Liv cardholders, Visa said: U.S. dollar, British pound, Canadian dollar and Australian dollar.

Visa first launched VFC about a year ago in Japan with Sumitomo Mitsui Card Company (SMCC), issuer of the Olive card.

"The Visa Flexible Credential all started with a simple idea that consumers should easily be able to choose how they want to pay," said Jack Forestell, chief product and strategy officer at Visa. "Working with innovative partners like Affirm, Liv and SMCC helps us turn that idea into a reality. Together we're enabling more ways to pay and adapting to the unique needs of consumers – wherever they are in the world, or in their financial journey."

Change focus from interchange to functionality

If the U.S. launch of VFC proves successful, and the markers are there to suggest it will be, Visa will be on the road to eliminating merchant grousing over and potential government regulation of interchange, stated Richard Crone, CEO at Crone Consulting LLC. "It's a game changer," he noted in an interview with The Green Sheet. "And it provides cover [in terms of regulation] because it supports alternative network routing."

Once VFCs are fully and broadly operational, the Visa network can be used for initial authorization, tokenization, and ultimately the clearing and settlement of any type of transaction initiated at 80 million merchant points of sale (where Visa cards are accepted), with routing through any bank.

BNPL is just the tip of the iceberg. Think in terms of person-to-person, pay-to-bank decoupled debit, even business-to-business transactions.

Crone explained that he sees Visa positioning VFC to be what iOS is to Apple, what Windows is to Microsoft, what Android is to Google. Anyone can develop a payment app to run on the platform, and Visa can charge a toll. "But it won't be interchange," Crone said. In fact, any fee associated with VFCs will likely be a lot less than interchange costs merchants today.

Crone sees retailers like Walmart creating payment apps using VFCs, and transactions associated with proprietary networks (like the Star, NYCE and Pulse ATM networks) using VFCs, too. "Visa is trying to become be a network of networks," he said.

Flexing between accounts

Since debuting the Olive card in Japan with SMCC, more than 3 million Olive accountholders have taken advantage of VFC, Visa stated. It added that 70 percent of Olive cardholders are flexing between different account funding sources, like debit, credit and prepaid cards, and extensions of credit to pay for purchases.

The card also helps small businesses access credit and unlock cash flow by allowing them to switch easily between business and personal accounts. Visa said it will continue to test that feature in Japan and eventually roll it out to other markets around the world.

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