Visa pilots faster-payment services for banks

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Visa is testing two artificial intelligence-powered services that provide some of the benefits of faster payments without requiring funds to actually move right away.

This move furthers Visa's pitch as a tech provider, which the company is emphasizing after failing to acquire the data aggregator Plaid. Visa faces competition on this front from Mastercard, which recently won a contract to build a real-time payment system for Payments Canada, the payment clearing and settlement system operated by the Canadian Payments Association.

Visa announced the two services, called Smarter Posting and Smarter Settlement Forecast, on Tuesday.

Smarter Posting gives banks a customized score for each transaction during the authorization process, enabling banks to post transactions with 98% certainty that the payment will go through as indicated. This allows banks to provide more accurate balances to consumers as a way to help them avoid overdrafts.

Bloomberg

“If a transaction scores high, a bank can post it to the customer’s account before the payment actually goes through, making it easier to see how much money you’ve got in your account,” said Basu, Visa’s vice president of global product, in an interview.

Transactions will not technically move faster; there will still be a delay in authorizing transactions that require finalization, such as when a diner adds a tip at a restaurant, or a cross-border payment requires a foreign currency adjustment, Basu noted. But Smarter Posting gives banks confidence in pushing through debit and prepaid card transactions that data suggests are finalized.

Smarter Posting will launch in Europe in April with plans to expand globally in the near future, Basu said. Banks pay a fee to receive scores on each transaction.

The other service Visa is piloting, called Smarter Settlement Forecast, is aimed at smoothing out banks’ cash-forecasting strategies with artificial intelligence by looking ahead seven days to predict how much cash banks will need on hand each day to manage payment flows.

“Transaction volume and e-commerce ebbs and flows with various shocks to the system — like the pandemic — and Smarter Settlement will help acquirers and issuers get a view into how much cash they’ll be receiving in coming days to better manage liquidity and payouts to merchants,” Basu said.

Visa is piloting Smarter Settlement Forecast now with three undisclosed U.S. banks with a formal rollout planned for later this year. The service is available through the Visa dashboard as an add-on screen for a fee, according to Basu.

The two new services align with Smarter Stand-In Processing (Smarter STIP), another AI-powered service Visa introduced in August 2020, which lets Visa approve or decline transactions in case issuers’ systems go offline due to unexpected disruptions.

Though Visa has been using AI for payment processes for about 20 years, it was only recently that existing AI tools could be combined with richer streams of data to add insights into transaction and payment flows, Basu said.

“The dataset we now have is pretty rich and we’ve been able to apply this technology to give issuers, acquirers and end users clearer vision into transactions as they’re happening,” he said.