Visa leads the Middle East payments revolution

This week 60 of the region's top banks gathered in the Emirates Towers hotel in Dubai to plot the next step of the electronic payments revolution now sweeping across the Middle East.

These bankers met to discuss the introduction of pre-paid Visa cards, or more simply plastic payment cards with cash already loaded into them.

'This is plastic pocket money for children, or a means of paying wages to people without bank accounts,' says Visa's regional general manager Peter Scriven. 'Our aim is to replace cash at every level. This is a way for the banks to serve new sectors of the population that do not even have bank accounts.'

Visa has been around a long time as a payments system. Yet the reality is that Visa may be just on the threshold of becoming the dominant standard in electronic payments worldwide. For if the pre-paid card marks an attack on the lower end of the market, Visa also has the upper end of the transaction market within its sights.

'Over the past few years Visa has made considerable inroads into the B2B transaction payments market particularly in North America and Europe, and this is an area where we are likely to see growth in the Middle East,' says Mr. Scriven. 'Corporate purchasing and B2B business is a huge market, globally estimated at $18 trillion per annum compared with current worldwide annual Visa payments of $2.3 trillion.

'The potential savings to corporations are enormous. In some businesses around 25% of the value of a corporate purchase is lost by internal processing costs. Visa can reduce that to around 5% which is a massive saving'.

Some major corporations in the Middle East have already switched to using a Visa purchasing card. For example, the world's biggest oil company, Saudi Aramco, uses Visa purchasing cards issued by Riyad Bank.

The Visa Purchasing Card scheme also has big benefits for corporate suppliers who receive instant payment for goods that might have had invoices outstanding for months under old payments systems.

An important point to note is that Visa Purchasing cards are always issued by the banks. 'Visa payments systems simply move banks towards the most efficient means of transferring money,' says Mr. Scriven. 'This in no way challenges the bank's role as a corporate payments intermediary. Visa just runs the payments transfer system'.

'We do say to the banks that are developing their own B2B systems that there is little point in investing millions to produce a parallel system, and Visa prides itself on developing open industry architecture available to all'.

Another example of such an approach is in the recently introduced 'Verified by Visa' technology for secure shopping on the Internet. This technology has also now been adopted by MasterCard, and is a further instance of Visa securing a further payments channel literally in this case.

Not surprisingly, staff members in Visa's Dubai headquarters have been issued with 'bash cash' badges. For, cash is public enemy number one for the electronics payment giant in the Middle East.

'Last year we saw 25% growth in point-of-sale use of Visa cards,' says Mr. Scriven. 'That is tremendous growth but there is still a long way to go in a region where cash is still the favorite payment medium. But POS card use is a sign that we are moving in the right direction.

'We also continue to roll out smart chip cards, and I predict that the chip will become the enabler for a direct relationship between the banks and their customers,' he adds. 'It will not be long before every PC has a chip reader and that will give access to online banking information.'

It is impossible not to be impressed by the breadth of the Visa payments revolution. From the corporate treasurer buying a fleet of cars, to a child who needs a credit card to shop on the Internet, Visa has the low cost payments solution for all. What else is in store?

'Mobile commerce on mobile phones is also a tremendous opportunity,' says Mr. Scriven. 'We also see online shopping growing exponentially from a low base. Online shopping has risen ten-fold in the past year in Saudi Arabia. And it will grow as Internet use expands in the region'.

Clearly it looks as though Visa is winning the payments race in the Internet age with a fully integrated solution.