How Visa is Embracing Both the Blockchain and Cryptocurrency

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"2015 has turned blockchain into something the industry has to live with. It is no longer a choice anymore. Recent news speculating about the identity of its creator and the formalization of virtual money as a commodity, just makes it more real than ever before" ~ Visa

While most financial institutions remained skeptical about bitcoin and digital currencies at large and focused instead on its underlying technology, blockchain, Visa (V) has embraced both the idea of a digital currency and blockchain. Here’s a look at how Visa has advanced towards digital currencies and the blockchain technology over these years.

Adding speed, security and transparency via Blockchain

Back in September 2015, Visa made an investment in Chain during its equity fundraising wherein it raised $30 million from industry leaders, including Nasdaq, Citi Ventures, Capital One, Fiserv, and Orange.

By October 2016, Visa announced a preview of Visa B2B Connect in collaboration with Chain. Visa B2B Connect was built upon Chain Core, an enterprise blockchain infrastructure, to offer financial institutions a cost-effective, fast, transparent, and secure way to process business-to-business payments globally.

During its early years of experimentation with blockchain, Visa had partnered with blockchain specialist BLT Group for a project to use BTL's cross-border settlement platform Interbit to explore the ways in which blockchain-based settlements can reduce the friction of domestic and cross-border transfers between banks. Another of its earlier collaboration, Visa Europe Collab partnered with Epiphyte to explore use-cases of the blockchain technology, such as international remittances.

Visa filed a patent for blockchain-based transaction system in October 2016, whose details were disclosed by the United States Patent and Trade Office (USPTO) in August 2017. Visa’s patent application was related to “methods and systems for using digital signatures to create trusted digital asset transfers.”

In 2017, the global credit card giant rolled out the pilot phase of its blockchain-based business-to-business payments service, B2B Connect. Commerce Bank in the United States, Shinhan Bank in South Korea, Union Bank of Philippines, and United Overseas Bank in Singapore were a part of the project. Visa B2B Connect is an innovative “new network designed to enable participating financial institutions and their business customers to make global business payments that are streamlined, secure, and predictable.”

Visa and IBM collaborated in October 2018. Visa integrated open source Hyperledger Fabric framework from the Linux Foundation with Visa’s core assets to provide improved process to facilitate financial transactions on a scalable, permissioned network.

In April 2019, FIS integrated into Visa B2B Connect Platform enabling participating FIS client banks to be able to send and receive large-ticket international corporate payments quickly and securely. June marked Visa’s commercial launch of the Visa B2B Connect network, allowing financial institutions to quickly and securely process high-value corporate cross-border payments globally. At the time of launch, the platform covered more than 30 global trade corridors. In September, Visa collaborated with Infosys, a global leader in next-generation digital services and consulting. At this time, its B2B Connect network had already doubled to reach to 62, with the goal to expand to over 100 countries in 2020.

Moving towards digital currencies

Visa believes that “digital currencies offer an exciting avenue for us to continue doing what we do best: expanding our network-of-networks to support new forms of commerce.” While blockchain-backed digital currencies hold great promise in terms of revolutionizing the existing systems, their adoption has not been as swift. This has been largely due to the regulatory ambiguity, especially in the initial years, and limited merchant acceptance.

The launch of cryptocurrency debit cards, which began in 2017 offered a solution. Visa has been working closely with licensed and regulated digital currency platforms like Coinbase and Fold to provide a bridge between digital currencies. In February 2020, Coinbase was granted Visa principal membership. According to Visa, around the world, “more than 25 digital currency wallets have linked their services to Visa, giving users an easy way to spend from their digital currency balance using a Visa debit or prepaid credential—anywhere Visa is accepted.”

In mid-2020, the U.S. Patent and Trademark Office made public a patent filling done by Visa in November 2019. The patent relates to a “digital fiat currency.” It covers a process on blockchain by a central entity computer to create a digital currency. The central entity computer generates the digital currency for the denomination and links to the serial number.

In addition, Visa has been engaging with policy makers and organizations to help shape the dialog and understanding of digital currencies. Visa along with other participants is working with the “World Economic Forum on a set of policy recommendations for central banks exploring the concept of Central Bank Digital Currency (CBDC).”

Recently, BlockFi, a cryptocurrency fintech company, has partnered with Visa along with Evolve Bank and Deserve to release credit card rewards in bitcoin to U.S. residents (in states without restrictions) in spring 2021.

In another recent development, Circle joined the Visa Fintech Fast Track program. Circle plans to issue a Visa corporate card enabling businesses to spend USD Coin (USDC) anywhere Visa is accepted. The partnership will enable support for USDC payouts to Visa's growing network of digital currency wallets.

Final Word

“To be the best way to pay and be paid, for everyone, everywhere,” has been Visa’s mission since it began in 1958, and even today, it continues to adapt to changing times and forms of money (plastic, electronic, digital and virtual) to be able to live up to it.

Disclaimer: The author has no position in any stocks or digital currencies mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration. The report has been carefully prepared, and any exclusions or errors in it are totally unintentional.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Prableen Bajpai

Prableen Bajpai is the founder of FinFix Research and Analytics which is an all women financial research and wealth management firm. She holds a bachelor (honours) and master’s degree in economics with a major in econometrics and macroeconomics. Prableen is a Chartered Financial Analyst (CFA, ICFAI) and a CFP®.

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