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Visa has said it is "reinventing" the card with a new flexible credential feature, but its success will depend on other stakeholders in the payments chain building features to accommodate it.
At last week's annual Visa Payments Forum in San Francisco, Visa announced seven new features that aim to bring physical cards and other legacy payment methods “into the digital age”.
The seven features include pay-by-bank capabilities, Visa Protect for account-to-account (A2A) payments and new ways to tokenise payments data to improve customer profiling and personalised offers.
But the headline act among the new features is the Visa Flexible Credential, also known as Flex.
This allows Visa customers to make payments from a single "credential" that would normally involve using multiple cards or accounts. The credential can also be programmed by the customer using “smart rules”, so that it draws from specific cards for specific types of transactions.
For example, a customer could set the credential to spend via a debit card up to a certain transaction amount, and switch to a credit card beyond that amount. They could also set it to use “pay-in-four” instalment payments or to use different types of reward points for particular transactions.
Speaking with Vixio, a spokesperson for Visa said the Flexible Credential will launch in the US under a pilot scheme later this summer, with its pay-in-four option provided by Affirm.
The feature is already live in Asia, where it is currently being offered by a single, unidentified issuer, and Visa plans to launch it in the EU and Central Europe, Middle East and Africa (CEMEA) next year.
The development of Flex follows a 2022 Visa study which found that more than half of card users want to access multiple accounts through a single credential, rather than using separate cards.
Under the hood
Visa’s reveal of the flexible credential has led to much speculation within the payments industry as to how the feature will work.
Tuesday Uhland, Visa’s head of global product, technology and brand communications, spoke with Vixio to clarify some of the key points. She confirmed that Flex will not work across multiple issuers, i.e., multiple funding sources.
“Flex can only pull from different accounts within the same institution,” she said. “It’s a new credential, designed to be a way for an issuer to provide a more holistic set of services on the same credential.”
Uhland noted that Visa sees Flex as a platform that issuers can use to build deeper relationships with customers. For example, an issuer could begin by offering a debit card to the customer, and after six months it could offer instalments, and then in future it could also offer a line of credit.
From the customer’s perspective, all of this can be offered “on the same card” within Flex, even though the issuer will be handling multiple cards behind the scenes.
As such, it is also important to note that each card that is linked to Flex will still have its own Bank Identification Number (BIN), as usual.
Matt Jones, consultant and advisor at Payments Culture, said the main function of Flex is to offer an “intuitive interface” between separate cards in a single wallet.
Knock-on effects
Another key point of interest is whether others in the payments chain will need to introduce hardware or software updates to support Flex.
Terry Angelos, founder and CEO of TrialPay and former global head of fintech at Visa, told Vixio that changes would be required within the “acquiring ecosystem of terminals and processors”.
“Payment terminals often have hardcoded routing based on debit vs credit designations,” he said. “For Flex to work, you will need terminals and the logic that manages how a transaction is processed to be able to handle this new logic layer.”
Uhland confirmed to Vixio that terminals and/or acquirers will “generally” need to make changes to identify the Visa Flexible Credential prior to a transaction being processed.
Once a Flex-enabled transaction is identified, systems must also be able to identify the consumer’s desired funding source for the transaction. In addition, processing changes may be required to align with Visa’s Global Processing Electronic Data Quality Program.
These changes are part of a wider Visa effort to align processing specifications globally during 2024.
Marqeta, which partnered with Visa on developing Flex, notes in a 2024 developer guide: “Visa continues to make enhancements for global processing alignment to include new tags and include account funding source in additional transaction types.
“Additionally, Visa will enhance [its] Electronic Data Quality Program (EDQP) by introducing a new Authorization Characteristics Indicator (ACI) value and broadening requirements for transactions.”
