Fewer consumers are relying on physical banks to get payment cards, giving Visa and Mastercard an incentive to bet on technology that expedites the work of neobanks and fintechs.
Visa on Monday made an investment in Global Processing Services, which powers the payment rails for several challenger banks and fintechs, giving the card brand greater visibility in that part of the market while Global Processing Services picks up funding to fuel a geographic and product expansion.
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“There is a genuine opportunity for issuer processors to set up at the same time in many markets. The factors that are driving digital and smartphone adoption are ubiquitous, as is the movement away from cash that’s been driven by the coronavirus,” said Joanne Dewar, CEO of the London-based Global Processing Services, which has issued about 153 million cards and counts the challenger banks Revolut and Starling among its clients. GPS relies on APIs, among other tools, to quickly enable other firms to digitally issue payment cards.
The size of Visa’s investment was not disclosed, and Visa did not return a request for comment by deadline. Visa has an existing
GPS has also added payment technology for Australian neobank, Xinja Hong Jong virtual bank WeLab and is part of Visa’s payment innovations planned for the 2021 Tokyo Olympics.
“There’s a chance to be first to market with a number of Visa’s products and functionality,” and there are added deployments that have not yet been made public, Dewar said. “Visa is working at future-proofing itself and evolving along with new functionality is the key to that.”
Visa’s investment is similar to a January investment
The Mastercard-Marqeta partnership is meant in part to speed certifications for payment processing. Dewar said EU rules and the company’s bank network ease licensing for fintechs, enabling faster onboarding for card issuance.
In Asia and other markets that process is slower and more reliant on each nation’s regulations, though GPS does plan to expand to the U.S. and grow outside of Europe. GPS also builds issuance at the start via an API connection, which is designed to retrofit an API into existing technology, which Dewar said adds efficiency.
“GPS is known for its digital account opening, so their distribution network is not legacy branch-based and paper bound,” said Richard Crone, a payments consultant. “One way to look at them is they are similar to a CUSO in the credit union industry or what Stripe is to merchants.”
Visa and Mastercard have made similar moves in the recent past to quickly adjust to trends that were emerging from the technology industry more than traditional banking. In 2019, Mastercard acquired Transfast and Visa acquired Earthport at around the same time to address the fast growth in
The outlays were small by Visa and Mastercard’s standards, but they were strategic. By making relatively smaller investments, the card brands avoid the time, expense and potential regulatory headaches that would come from trying to acquire a major merchant acquirer, Crone said.
“An investment like GPS is small but it gives Visa big upside,” Crone said, adding many small banks and credit unions don’t have digital account opening. “Any challenger bank can use GPS’s APIs to open accounts instantly inside Apple Pay, Google Pay, Samsung Pay, Fitbit, etc.”
