Visa (NYSE: V) has recently reported relatively strong Q1 results. There was plenty of good news ranging from payments, cross-border volumes and processed transactions going up to compilation of the acquisition of YellowPepper. GAAP and non-GAAP net income came up to $3.1B or $1.42 per share. Payments volume, cross-border volume and processed transactions growth went up. All these have been trumped by an unexpected piece of news pointing out Visa's aspirations to leverage Bitcoin and crypto-banking in order to accelerate their network growth.
Partnership with First Boulevard
How can established players fortify their position and innovate? Stephen Smith, VP Research Analyst at Gartner, suggests that executive leaders can adopt three tactics for cross-industry innovation:
- Identify innovative business models in other industries
- Accelerate innovation by partnering with others (often aggregating value propositions and IP).
- Consider counterintuitive ways to innovate. (1)
On the surface, one could claim that Visa’s strategy falls into the third category; why would a leader in credit card payments, an organisation associated with the old financial services world, consider adopting crypto-payments? To understand it, we need to dig deeper into First Boulevard, a neobank focused on Black community financial empowerment. (2) Strategic partnerships enable companies to expand beyond existing business models. This can be done through unlocking new customer segments, building new joint value propositions, exploring new channels through which you reach those customers or re-imagining how you get, keep and grow your customers.
First Boulevard will be first to pilot Visa’s new suite of crypto APIs, enabling its customers to purchase, custody and trade digital assets. If successful, this will translate into a larger opportunity for Visa to offer a broader range of new crypto-specific products as well as integrating crypto features into their existing product offering.
What’s next on the horizon
The partnership with First Boulevard is the first step in a journey to diversity and rethink what partnerships mean for Visa. CapWay, OneUnited Bank and Urban One are some of the other names mentioned that will help Visa reach new market segments. (3) What’s next for Visa on the crypto journey is quite vague at this stage. The solution portfolio right now concentrates around two areas:
- Visa Fintech Fast Track - “the quickest and easiest way to connect to Visa’s vast payment network and have Visa credentials issued to your users.”
- Visa Crypto APIs - that “can empower your users to buy and sell Bitcoin or participate in new crypto features.” (4)
Visa has also partnered with a number of digital currency wallets including BlockFi, Circle, Coinbase, crypto.com, Fold and Xapo.
Why should we care?
It will be interesting to revisit this story in a couple of months to see how successful Visa has been in their approach and whether it truly helped them unlock new customer segments. For me this story exemplifies a broader trend; more and more traditional players are exploring blockchain and crypto strategies. Traditional financial institutions were shockingly slow to respond to the rise of fintech. Many claim that they are making the same mistake with blockchain and cryptocurrencies. A number of banks, wealth management institutions, payment providers or insurers have finally started investing in either developing their homegrown solutions, which might compete with existing crypto or blockchain solutions. The more attractive angle is that taken by Visa - building ecosystems that can benefit from each other.