Visa Gets One Step Closer to a Cash-Less Society
Visa’s second quarter earnings showed that India’s decision to phase out several of its cash bills paid off for the credit card companies.
The Wall Street Journal by Avi Salzman April 21, 2017
Visa cards are showing up in more places throughout the world, as some countries try to reduce cash transactions. Photo: Bloomberg News
Visa and Mastercard executives dream of a cash-less society, where consumers buy everything on cards and their companies get a small percentage of every transaction. That dream got a little closer to reality last year when India suddenly phased out 86% of its cash, demanding that residents deposit their money in banks.
It was a shock to the Indian economy, where 78% of transactions were made in cash in 2015, versus 20% in the U.S., according to one study. (Other studies have said that more than 90% of Indian transactions were in cash.)
In the past quarter, Visa processed more than twice as many domestic transactions in India than they had the prior year, company executives revealed on a conference call after releasing earnings. And the number of establishments that accept Visa jumped by 50% to more than 2 million since the demonetization campaign by the government. Visa is now establishing partnerships with banks and other institutions to try to keep the momentum going.
Efforts to change government policy in regards to cash have huge potential for the credit card companies, because it means they won’t have to depend solely on economic growth to increase revenues. And India isn’t the only place where policy changes are helping out. In Japan, Visa is also hoping the government pushes for more digital transactions.
“I really believe that Japan will take off over the next few years, driven by a positive and active government in terms of driving payments to be more electronic, or digital, growth in contactless, and the emergence of e-commerce,” said CEO Alfred Kelly, Jr. “The Olympics in 2020 will be a great showcase for digital progress, as the games are largely going to be in and around the city of Tokyo.”
Expect the trend to pay off for years to come.