Next up: no cash, no card
Visa sees a time where it’s all on our mobile devices
By all accounts, Visa Inc. seems to be a well-running machine.
The San Francisco financial giant far outpaces Mastercard, its largest competitor, in everything from payments volume to total transactions and cards issued. Last year, Visa generated $15.1 billion in revenue, a 9 percent jump from 2015.
But as ubiquitous as Visa cards have become, the company is preparing for a future without them.
Visa has been giving a lot of thought to what it calls a “cashless future.” But in truth, it sounds a lot like a cardless future.
For example, Visa recently unveiled a new technology that allows people to pay for goods and services by scanning a QR code on a mobile device. Visa is eyeing the technology for developing countries like India that lack the infrastructure to process card transactions.
But given the growing ubiquity of smartphones in the United States, it wouldn’t be hard to picture a time when we won’t even have to carry plastic cards because all payments will be done mobile device to mobile device.
We’re already seeing that happen with the gig economy. Thanks to companies like Uber and Lyft, people pay for rides and even tip drivers just by tapping a button on smartphones. No cash. No cards.
I recently spoke with Sam Shrauger, head of digital products at Visa, at the company’s new innovation center in San Francisco’s Financial District. Before joining Visa, Shrauger worked briefly at Yahoo and for eight years at PayPal. The following conversation has been edited for length and clarity. Q: So give me a little context here. How did we evolve to a point that we will no longer need cash? A: When we originally started Visa in 1958, the technology was essentially running a card through and then sending in paper drafts. When landline connectivity became reasonably inexpensive in the early 1970s, we actually started the process of digitizing cash: Present a card in a store, send some data over to us as a payment network and then we would return the approval from the bank that
you were good for the transaction.
Since then, cards have become more and more pervasive, whether they’re debit cards, credit cards — people have become very used to not having to walk around with cash. You add on top of that the sort of pervasive growth in all of these connected devices like computers, mobile devices and tablets. Now refrigerators and cars that are connected to the Internet are going to become points from which you could initiate a transaction. Q: And cashless could mean cardless as well? It sounds like you don’t even need to take out your card. A: There’s an evolution certainly toward more and more card-free forms of payment. Even if you look at the growth rate of e-commerce, it’s all cardbased but not with actual cards, and that’s growing much faster than the rate of retail where people maybe actually swiping or dipping a card.
What the time horizon is for a cardless future I don’t know, but ultimately we are going to be in a position where you don’t need a physical element to carry around with you to provide the information you need to pay. That information is stored on a mobile phone or a wearable device, or some combination of all of those things. It’s going to take time just because people are very used to cards. But that’s going to change pretty dramatically.
Uber is an entirely cashless business in that I can pay the driver without a card. Q: Did the emergence of the gig economy lead to this idea of a cashless society, or was Visa already thinking about this anyway? A: At the end of the day, there’s a lot of efficiency to be gained by electronifying payments, and that’s what we do. The gig economy has been a very good catalyst for a new category of transactions that, you know, nobody had really thought about 10 years ago, but they’re upon us now. Q: Would it surprise you to learn that the amount of cash in circulation is actually growing? A: Depending on geography, there are different behaviors around cash. In the United States, the cash in circulation and cash as a percentage of gross domestic product has actually been going up. But there are other countries where the opposite has happened. If you look at some of the Nordic countries, they’ve driven cash down to 2.5 or 3 percent of the economy.
Those governments actually took very proactive measures to drive toward a cashless society. A lot of other countries have looked at India and said, “We should start thinking about our futures as well.” They really want to migrate away from cash. Ultimately, going cashless generates economic efficiency both for the merchants themselves, as well as ease and simplicity for consumers.
“Ultimately we are going to be in a position where you don’t need a physical element to carry around.” Sam Shrauger, Visa’s head of digital products