'I'm asked who my competitors are. Our main competition is cash' - Visa boss Nicolas Huss
About 70pc of retail transactions in Europe are still done with cash, and that, says Visa boss Nicolas Huss, means a big growth opportunity
Published 16/06/2016 | 02:30
Nicolas Huss has been a regular visitor to Ireland over the past decade. As he settles in for a chat on a distinctly humid afternoon, the Frenchman reminisces briefly about his visits, watching rugby in the old Lansdowne Road stadium and how much things have changed here.
And while the capital's skyline has been altered, so too have our spending habits, both in terms of where we spend, how much, and how we pay.
And as chief executive of Visa Europe, Huss (51) can see every single day just how many credit and debit card transactions are processed by the company.
Last year, Visa Europe processed 16.8 billion payment authorisations and leads Mastercard in the region. There were 522.6 million Visa cards in issue by Visa Europe at the end of 2015, compared to 439 million in 2011.
But about 70pc of transactions in the region are still settled in cash. And Huss sees that as a massive opportunity.
"We are statistically very far from being cashless societies," he says.
"It's great for us. When you think that you still have 70pc of the market to address, it's a great opportunity. When I'm asked sometimes who my competitors are, our main competition is cash."
But its competitors, in reality, are also the large number of fintech startups and payment processing firms that have been established by global groups such as Apple, Paypal and Samsung. Last year, US-based Visa Incorporated - with which Visa Europe will consummate a merger within weeks - invested as part of a $300m fundraising in Stripe, the digital payments company established by Irish brothers Patrick and John Collison.
Huss points out that traditionally, Visa was a closed-end system, where it owned the infrastructure.
"Now the consumer is in the driving seat. A lot of the new startups are fintech companies. We used to own, and now we need to enable. That makes a lot of sense to a global company."
Huss says that to remain successful, reinvention is key.
"It will take some time for the challengers to get where we are," he insists. "We need to use this time to enable rather than to protect."
Collaboration is key to ensuring Visa's future relevancy, he says.
Visa Europe spends "an awful lot of money", adds Huss, on innovation and developing technology (according to its annual report, it spent €12.8m last year on R&D).
"We used to innovate for ourselves, but now we do it much more in partnership. We opened our APIs (application programming interface) to developers.
"As soon as developers meet our Visa quality standards, we will open the interface to them. We're partnering much more with startups and other companies. We created an innovation lab almost two years ago, with offices in London, Berlin and Tel Aviv. It tests proof of concepts."
But Huss still believes that Visa has a real edge over other payment processing rivals.
"I'm very conscious that we have some key attributes from a consumer point of view. Visa is one of the top brands worldwide. People trust us. Safety, reliability and security are attributes that our challengers will need some time to attain."
"We take advantage of that, and try to shift the payments industry into something much more modern and adapted to what consumers need," he says.
That includes pushing contactless payments, where consumers simply have to tap their card against a terminal to complete a transaction, without having to enter a pin code. In Ireland, the permissible limit for such individual transactions was raised in the last budget from €15 to €30.
That prompted a doubling in the use of contactless payments in Ireland. During the six months to the end of March, Visa recorded 1.3 million contactless payments a week here, which was twice as many than in the previous six-month period.
Huss said the contactless payment initiative has been "incredibly successful" in Ireland, and that since March, the weekly number of transactions here has already jumped to 1.7 million. That's about one out of every five Visa transactions.
Usage quadrupled in convenience stores and more than doubled in bars and nightclubs.
"In Europe, we'll have 4 billion contactless transactions this year," according to Huss. In some countries, contactless payment usage has surged, partly as a result of government initiatives. In Poland, for instance, contactless payments account for between 50pc and 60pc of Visa transactions, while in Czech Republic it's between 60pc and 70pc.
And contactless payments haven't yet made big in-roads into the United States (Visa calls it payWave there), which helps to demonstrate just how the acquisition by Visa Inc of Visa Europe should pay dividends for both firms.
"It's not a classical acquisition. We've been part of Visa International for a lot of years," he says.
Visa separated into Visa International and Visa Europe in 2007, with the former embarking on a US stock market flotation and the latter remaining under the joint ownership of banks across Europe.
"We always worked together. We share the brands. We share some common technology. We already have a lot of activities together," adds Huss, who joined Visa Europe as chief executive in 2013, having previously headed Avant, the credit card and consumer loan servicing firm that's owned by private equity giant Apollo.
Post-acquisition, he'll continue to head the European Visa business. Visa Inc generated net operating revenue of $13.9bn last year and net income of $6.4bn. Visa Europe posted revenue of €2.3bn and a pre-tax surplus of €430m.
Visa Inc is more technologically advanced than Visa Europe, according to Huss.
"In terms of new technology and innovation overall, Visa Inc is the more advanced player," he says. "They're located in Silicon Valley, so have direct access to the main players in terms of innovation."
Huss points out that Visa Inc has been developing systems with car manufacturers in the United States.
That 'contactless car' initiative might also for example, see petrol pumps communicate with vehicles to know precisely how much fuel is required and for the payment to be completed automatically once the fuel is pumped.
The driver could also receive promotions from the fuel vendor on an in-vehicle screen, allowing them to also pay for a coffee, for example, at the same time. And all that would be done without ever having to produce a card.
Visa Inc has recently opened an innovation centre in Dubai, to add to ones it already has in San Francisco and Singapore.
But are there are some things that consumers wouldn't be ready for? Huss won't say, but points out that even contactless payments were a long time on the drawing board.
"Some of the things are so innovative, they could take five or 10 years before they reach the market. We made the bet on contactless payments 10 years ago, but nobody was ready for that then."
Meanwhile, it's not only innovation that's changing the landscape for Visa.
Increasing regulation, both from Brussels and from governments, forces Visa and other financial firms to continually adapt.
"A lot of people think payments have become a commodity," explains Huss. "That's positive. A lot of regulators want to fight against cash.
"They believe that by making payments cheaper, and by increasing regulation, that they will increase the perception among the end consumer that it is safe, and cheap.
"The approach was done with a lot of goodwill. But at some point if you make everybody's life very difficult, the consumer will be impacted."
"I think we're getting to the limit of the system here."
And if new regulations keep being piled on?
"We'll keep adapting. We've been doing that all the time. We have never as a payment industry been so successful. So yes, we keep adapting. That's what we have to do."