People love going out to dinner with friends; inevitably, everything goes well, until it comes time to pay the bill. Often, no one person seems to have enough in their wallet to actually pay their share. So everyone reasonably, decides to pay by credit card. Of course, that would mean that this restaurant would have to come up with five bills, one for each diner. Needless to say, the restaurant doesn't see any sense in this, and it asks the diners to deal with it. And so, after a lot of serious negotiating the whole sorry affair ends with a set of payment agreements so complex, it would do a hedge fund manager proud. Do things really have to be this difficult? Can't we have a personal payment solution where people can just use their cards to pay one another not always a business?
As sophisticated a financial world as we live in today, there still is no real remedy for this. If you ran out to the ATM, you would have to pay fees. PayPal exacts its pound of flesh too. Why does America not have a way by which people can just pay each other without cash in hand?
Visa seems to think that it's ridiculous that we don't have a solution to this. They announced in March that they would soon have a person-to-person payment solution ready for the market. From now on, splitting our checks, paying the kid who mows your lawn, paying allowances, everything becomes easier. Starting this summer, anyone who has a Visa card will be able to send money to another Visa cardholder, no matter what bank they go to or where they live. You get your babysitter’s Visa account number or their cell phone number, and the money you send just appears in their account. It's as simple as that. You don't even have to mess with any tiny credit card readers that attach your iPhone (recall The Square).
This could really revolutionize the whole credit card industry and small business. No longer do small merchants have to pay a punishing 5% processing fee every time they process a credit card the way they would in the conventional way. The surprising thing is, that America is last among the developed countries to come up with such a thing.
Visa says that it needed all this time to bring this payment solution to America because it needed to upgrade VisaNet in America before it could get the process rolling. It needed time to form strategic partnerships with companies and it needed to work with banks so that they would be able to actually get the money coming and going. Of course, that's a non-explanation. Because somehow, Visa was able to get all of this in place years ago and other countries.
The problem in America has basically been the banks. The banks have been reluctant to allow transfers like this for free. They've always made a lot of money on these transfers; if they allowed Visa into this space, they'd lose a huge income stream. Visa plans to charge no more than a dollar for a transfer. If Visa’s plan is successful, PayPal should be the company that loses the most. Maybe the new Visa program will make PayPal cheaper and better.
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