Visa Charges Ahead Into M-Commerce

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Visa International became the first major credit card company to move into the mobile commerce space when it partnered with Trintech Group last week.


Although the number of Internet-enabled wireless devices in the United States is minimal, the mobile commerce explosion is inevitable, according to at least one analyst. Visa is ready.


The partnership will allow Visa card users to make purchases in a simplified fashion using their Palm Pilots, cell phones and other devices as early as the third quarter.


Consumers who have Web-enabled wireless devices will need only to click a "buy" button when they are served an offer. They will be asked to enter a personal identification number, which will complete the purchase.


On the back end of the system, the consumer's credit card data is stored in the servers of the customer's bank or on the service provider's network. When the consumer clicks the "buy" button and enters his PIN, the data is securely transferred to the site where the purchase is being made. Visa has relationships with more than 21,000 banks.


The infrastructure for the system is Trintech's PayWare mAccess, a secure payment solution designed for mobile devices.


"From a consumer standpoint, it's easy to use. It's more attractive than a PC browser because you don't have to fill out forms, your delivery address and all that mundane stuff," said John McGuire, CEO of Trintech Group PLC, San Mateo, CA.


Visa is early to the party, but this is a solid strategy, according to Chris Christiansen, an analyst at the Internet Security Program of International Data Corp., Framingham, MA. Whether it is a leader in the space is moot, he said.


"Market leadership in a market that has hardly any users is hard to define. But m-commerce will happen so fast and so quickly that being early to market is a good thing," he said.


Merchants are likely to be attracted to this new technology because it will give them a greater profit than e-commerce sales. "It offers them a little bit better margin," Christiansen said.


Because mAccess is a more secure payment method, the credit card company will charge a lower percentage fee than a card-not-present transaction, Christiansen said. The credit card companies charge higher fees for riskier credit card orders such as phone transactions. An in-person transaction carries the lowest fee.


The "repudiation" factor is also reduced. This means that the likelihood of a consumer claiming he did not order a product or service decreases because a PIN was required to complete the purchase.


"Consumers will have a more difficult time fraudulently returning stuff they said they never ordered," Christiansen said. "This is really good for the merchants, the credit cards and the banks. The customer entering the PIN is a strong form of verification."


Globally, this offering will give Visa a leg up on its competitors. "Forecasts show that there will be as many as four times the number of wireless devices connecting to the Internet in the next three to five years," McGuire said. "Asia, Europe and Latin America [will fuel that growth]. E-tailers have to get ready for this new onslaught of wireless access."


Christiansen agreed. "They're broadening the Visa brand way beyond the U.S.," he said. "They're leapfrogging the other credit card companies in emerging markets on emerging devices."


Trintech, which has relationships with MasterCard and Discover, expects Visa's competitors to jump on board in the near future. MasterCard and Discover have used the company's e-commerce technology.
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