Protocol | Fintech

The pandemic changed the way companies make payments. Visa wants to make that stick.

Gone are the days of paper checks, the company hopes.

The pandemic changed the way companies make payments. Visa wants to make that stick.

In the card space, Visa is using the pandemic to grow virtual acceptance.

Photo: Stephen Phillips/Unsplash

For Visa's Kevin Phalen, comparisons between the pandemic's economic impact and the 2008-2009 financial crisis aren't fair. The current situation is far more wide-reaching. But so, too, he says, are the opportunities to overhaul the B2B payments space.

Phalen, the head of global business solutions at the financial services giant, works with businesses of all sizes to expand Visa's network through both card and non-card transactions. In the wake of the pandemic, he's seen the ecosystem for the slow-to-change payments infrastructure soften toward modernization efforts and views 2021 as a year where the company can keep extending its reach.

"Fifty percent of corporate payables were still being done by checks," he said of the pre-pandemic landscape. When the pandemic hit, "We saw this rapid acceleration of digital accounts payable and digital accounts received."

In an interview with Protocol, Phalen described how the pandemic helped suppliers embrace their card business, how technology is bringing together accounts payable and accounts receivable operations, and how Visa's network can work alongside the open banking trend.

This interview has been edited and condensed for clarity.

What kinds of behavioral shifts have you seen in terms of how businesses are adapting B2B payments to the pandemic?

There were two things that really emerged, and let's think about it both from a small business perspective and then a middle market, large corporate perspective.

If you think about small businesses, some didn't have an ecommerce infrastructure, and literally overnight, they had to rethink and go out and build out their presence. We saw this massive ask and need to build out their social media presence, their ecommerce presence to help them on their digital journey. The other thing was that the consumer dynamic dramatically changed, and [consumers] were very focused on the safety of their transactions. When it came to payments, all of a sudden, businesses moved from [being] a cash, check environment to [needing] to be a card environment to [needing] to be contactless. People were uncomfortable handing over their plastics, so they wanted mobile payments. The small businesses had to reimagine their business while also reengineering their payment infrastructure and rethinking things like payroll and accounts payable for their own organizations.

That's where the similarities then are when you think about middle market and large corporate clients. Unlike small businesses, most of them already had their ecommerce presence. They were omnichannel in the way they thought about payments. But all of their back-office accounts payable and accounts receivable required one thing that nobody really ever thought would be different: people going into the office to either look at their desktop, to write checks, to collect checks, to book entry checks, to go to a bank to deposit checks. Fifty percent of corporate payables were still being done by checks, so we saw this rapid acceleration of digital accounts payable and digital accounts received.

A lot of governments were trying to distribute to their constituents, and, unlike we have here in the U.S. through unemployment cards and benefit cards, they had no way of doing that distribution. But a lot of people have Visa cards, and we could push payments through Visa Direct so that those consumers, small businesses could get their PPP.

Historically, payments infrastructure change has been slow, but through the pandemic, we've seen modernization happen rapidly. Does that speak to adoption lagging in the past, or has there been a tech advancement that's played into it?

I'd say it was a little bit of both. We drew a lot of analogies to 2008 and 2009, because, in a similar manner, there was a crisis. But it was very different. It was a crisis of confidence in financial institutions. It was a liquidity crunch. But it forced corporates to really understand their accounts payable and their accounts receivable. At that point, within the payments world we saw virtual solutions starting to accelerate.

Fast forward now to this pandemic, the implications were significantly larger because it wasn't narrow in that it was impacting financial institutions. It was really across supply chains. The good thing was that fintechs were already on the rise in our world for accounts payable and accounts receivable. They had the solution set, and it drove immediate adoption, which is a little bit different. We needed a forcing factor to drive it to the digital environment, and quite honestly, the pandemic helped to drive that.

If companies have adjusted to accounts receivable and accounts payable teams working outside the office environment, to what extent will we see the pendulum swing back to normal once workers return to offices in full force?

I fundamentally believe the vast majority of it will stick because you can be much more efficient in a digital environment than in a manual, paper-based environment. We needed the forcing factor. Being a network, acceptance is important to us. We offer a service to go out to suppliers and say, please accept Visa cards. Since the pandemic began impacting us, we saw a 17% increase of suppliers saying they're going to take card that historically said [they] weren't going to take card.

What they did was readily admitted [that they] needed the best way, the most transparent way, the fastest way to get paid. And card-based transactions helped them to do that. Our goal will be to make sure that that sticks, but we also have to make sure that both the buyer and the supplier get value out of that electronic or digital payment infrastructure that we've built.

We've heard about pandemic-related disruptions to international supply chains from the logistics side of the house. How is Visa thinking about cross-border payments?

Where we've invested a ton of money across Visa is both in what we call high-value payments and low-value payments. In low value payments … we've developed a solution site called Visa Direct. It manages P2P, account-to-account, low-value payments, both cross-border and domestic. Everything from paying a gig worker to that small business [wanting] to pull down [a] merchant settlement in the middle of [the] day, we facilitate through Visa Direct.

We also took a tack a few years ago that high-value payments needed to be done differently. It was basically one solution that has been around for 40 to 50 years with Swift, and though they've done some great things to improve the infrastructure, we reimagined high-value payments and built out B2B Connect. That allows us to connect a bank in Kansas City to a bank in Ghana in Africa and do it directly versus [having] multiple correspondences [and] everybody touching the transaction with a lack of transparency.

Kevin Phalen views the pandemic as the forcing factor toward the digitalization. Photo: Visa

On the idea of collaborative commerce — bringing suppliers and buyers closer together — how close are you to an actual unification of the different silos?

What we do well is build networks. VisaNet is our core card network. B2B Connect is our high-value network. Visa Direct has a network. We connect all of those networks together. When we think about domestic accounts payable and accounts receivable, what traditionally has happened is organizations — whether they're financial institutions, whether they're fintechs — grew up on one side or the other. Fundamentally within business solutions, we believe we can connect accounts payable and accounts receivable providers together to build out that collaborative commerce environment.

[Look at] the work we're doing with a company called Billtrust, where we've built a Business Payments Network. It was built out of the concept of accounts receivable, but a key component of it is how we work with accounts payable people to make it easier for their buyers to pay their suppliers and take out the friction.

Where does open banking fall into that equation of reducing friction between accounts payable and accounts receivable?

If you think about the European model of open banking, it is very much access, exchange of data and information and payment infrastructure, so I think open banking itself probably accelerated things. We're here to look at how somebody wants to originate that payment, but also be able to handle it from a disbursement perspective. Whether it's account-to-account, card-to-card, card-to-account or account-to-card, we can sit in the middle between our networks, which is very much some of the concepts behind open banking.

And then obviously the other is the availability and exchange of data associated with open banking. Within business solutions, that exchange of data is critical because you need it for reconciliation, you need it for invoicing and the like. Our belief is we should be sitting in the middle of that.

Do you then worry at all about open banking facilitating a circumvention of your network, or do you think Visa's network still plays a role as open banking evolves?

I think it absolutely does.

I think the beautiful thing about open banking is it creates the ability for fintechs to work with financial institutions, to accelerate how they're thinking about payments as well. Look at the great things that have emerged out of Europe. Now, here in North America. Singapore is another example. The fintechs are embracing this new environment; they're bringing these new features and functions into financial institutions and helping to facilitate those payments appropriately. I think competition's a good thing. It challenges us all to innovate. Visa is fundamentally a technology company based on innovation, and we're going to continue to do that.

Continuing on innovation, as you're looking toward 2021, where are you focusing your efforts?

I think in the card space, with some of the small businesses, it's all about virtual and expansion acceptance, especially outside of North America. Everything that we can do for contactless and mobile payments, we're going to continue to accelerate those. We're going to continue to drive Visa Direct connectivity around the world. When I think about high-value, non-card-based transactions, it's all going to be about expanding the network and expanding the use cases in which we're operating. And then lastly, the third component is this idea of collaborative commerce between buyers and suppliers.

Protocol | Fintech

How European fintech startup N26 is preparing for U.S. regulations

"There's a lot more scrutiny being placed on fintech. We are definitely mindful of it."

In an interview with Protocol, Stephanie Balint, N26's U.S. general manager, discussed the company's approach to regulations in the U.S.

Photo: N26

N26's monster $900 million funding round announced Monday underlined the German startup's momentum in the digital banking market.

Stephanie Balint, N26's U.S. general manager, said the funding will be used for expansion and also to improve "our core offering to make this the most reliable bank that our customers can trust," she told Protocol.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

The way we work has fundamentally changed. COVID-19 upended business dealings and office work processes, putting into hyperdrive a move towards digital collaboration platforms that allow teams to streamline processes and communicate from anywhere. According to the International Data Corporation, the revenue for worldwide collaboration applications increased 32.9 percent from 2019 to 2020, reaching $22.6 billion; it's expected to become a $50.7 billion industry by 2025.

"While consumers and early adopter businesses had widely embraced collaborative applications prior to the pandemic, the market saw five years' worth of new users in the first six months of 2020," said Wayne Kurtzman, research director of social and collaboration at IDC. "This has cemented collaboration, at least to some extent, for every business, large and small."

Keep Reading Show less
Kate Silver

Kate Silver is an award-winning reporter and editor with 15-plus years of journalism experience. Based in Chicago, she specializes in feature and business reporting. Kate's reporting has appeared in the Washington Post, The Chicago Tribune, The Atlantic's CityLab, Atlas Obscura, The Telegraph and many other outlets.

Apple’s new MacBooks are the future — and the past

After years of reinventing the wheel, Apple's back to just building really good ones.

Apple brought back the ports.

Photo: Apple

The 2015 Pro was, by most accounts, one of the best laptops Apple ever made. It was fast and functional, and it had a great screen, a MagSafe charger, plenty of ports, a great keyboard and solid battery life. If you walked around practically any office in Silicon Valley, you'd see Pros everywhere.

Many of those users have been holding on to their increasingly old and dusty 2015 Pros, too, because right about when that computer came out was when Apple seemed to lose its way in the laptop market. It released the 12-inch MacBook, an incredibly thin and light computer that made a bunch of changes — a new keyboard and trackpad design chief among them — that eventually made their way around the rest of the MacBook lineup. Then came the Touch Bar, Apple's attempt to build an entirely new user interface into a laptop.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editorial director. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Protocol spoke to founders and tech execs who've embraced async and have tips on how to get started.

Image: Christopher T. Fong/Protocol

Imagine a company where there are no meetings — just time for deep, focused work punctuated by short conversations on Slack and project updates on Trello.

Now imagine a company where the no-meeting ethos is so ingrained that it's possible to work there for 10 years without ever speaking face-to-face with a single coworker, and for your boss to not even recognize the sound of your voice.

Keep Reading Show less
Michelle Ma
Michelle Ma (@himichellema) is a reporter at Protocol, where she writes about management, leadership and workplace issues in tech. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com.
Protocol | Workplace

#AppleToo activist says Apple fired her for deleting apps from her devices

Janneke Parrish says she was dismissed after deleting Robinhood, Pokemon Go and Google Drive from her work devices during an investigation inside the company.

The Apple Too movement is trying to organize Apple workers into a collective movement.
Photo: Bloomberg via Getty

Unlike most other companies, Apple asks that its employees use their work phones like personal ones — and for five years, Apple program manager Janneke Parrish did as she was told. But last week, when Apple asked Parrish for her devices in an internal investigation, she was afraid Apple would see her personal and private information. She disobeyed orders and deleted apps like Robinhood, Pokemon Go and Google Drive. Then Apple fired her.

Keep Reading Show less
Anna Kramer

Anna Kramer is a reporter at Protocol (Twitter: @ anna_c_kramer, email: akramer@protocol.com), where she writes about labor and workplace issues. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.

Latest Stories