Visa pushes 'pay by bank' in the UK; Klarna faces AML heat

Visa plans to upgrade its current pay-by-bank model in the U.K. early next year to give customers more control and flexibility around paying bills and managing subscriptions.

The credit card network plans to implement biometric security, a formal dispute resolution process, and a simpler way to set up and manage payment permissions for utilities, rent and childcare fees. Businesses will be able to access real-time settlement through Faster Payments, include more transactional data for reconciliation and receive notification when a customer changes or cancels payment permissions. 

Visa aims to gradually expand to cover subscriptions such as streaming services, gym memberships and food boxes, the company said in a release. 

"Bank payments are a popular way to pay bills and services but have remained largely unchanged since the inception of direct debit 60 years ago," said Mandy Lamb, managing director of Visa UK and Ireland, in a statement. "Visa A2A will ensure consumer-to-business bank transfer payments have similar levels of protection that consumers are used to when they use their cards." 

Visa is working with payment vendors such as Banked, Modulr, Moneyhub, Salt Edge, Vyne and Yaspa. 

Adoption of account-to-account payments has been on the rise in the U.K., according to Visa. Last year, 3.7 trillion pounds ($4.8 trillion) was paid through A2A Faster Payments, a 15% increase over 2022. Both Visa and Mastercard have made investments in their A2A functionality in the last couple of years despite the fact that the payment method is considered an alternative to credit cards. —Joey Pizzolato

Sweden's Financial Supervisory Authority has reportedly contacted Klarna with allegations that the financial institution has shortcomings in money-laundering prevention, including general risk and know-your-customer rules.

The letter, which was redacted and reported by Swedish news outlet Dagens Industri, says the FSA will examine if there is cause for further regulatory action. Klarna did not comment.

Klarna, which is best known in the U.S. as a buy now/pay later lender, is reportedly preparing for an initial public offering in the U.S. next year. Ahead of that IPO, Klarna has added financial services such as savings accounts and has also invested heavily in artificial intelligence.

The firm has also distributed generative AI to most of its staff and leaned into AI as part of its staffing strategy, saying gen AI will allow the firm to reduce its staff by about half and will enable Klarna to avoid hiring employees outside of engineering roles.—John Adams

Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corp. and Mizuho are collaborating on Project Pax, a platform that uses stablecoins, blockchains and Swift technology to enable financial institutions to execute cross-border payments.

Blockchains are a form of cryptocurrency backed by reserves of traditional money, which is designed to mitigate the volatility of other cryptocurrencies. As such, stablecoins are considered to be the best form of crypto for payments and are popular with fintechs and payment technology companies.

Project Pax will integrate a blockchain into the banks' existing payment systems using Swift's application programming interface, a model that is designed to minimize the amount of technology work that other banks need to perform to adopt Pax's payment rail.

Other firms, such as Ripple Labs, have also used blockchains to simplify payment processing for international transactions. The blockchains, and the underlying cryptocurrency such as a stablecoin, allow the payment to be executed without relying on third parties such as correspondent banks to manage currency exchange and local compliance. —John Adams