Visa introduces a new product designed to protect consumers who make bank transfers

Visa has said it plans to launch a dedicated bank transfer service that will bypass credit cards and the traditional direct debit process.

Visa, which together with Mastercard is one of the largest credit card networks in the world, announced on Thursday that it plans to launch a dedicated account-to-account (A2A) payments service in Europe next year.

With just a few clicks, users can set up direct debits in merchants’ online stores. These are transactions where the money is debited directly from your bank account.

Visa said consumers can more easily monitor these payments and report any issues by clicking a button in their banking app, giving them a similar level of protection as when using their cards.

The service is intended to help people deal with issues such as unauthorized automatic subscription renewals by making it easier for people to reverse direct debit transactions and get their money back, Visa said. It won’t initially apply its A2A service to things like TV streaming services, gym memberships and food parcels, Visa added, but that’s planned for the future.

The product will first launch in the UK in early 2025, followed by releases in the Nordic region and elsewhere in Europe later in 2025.

The problem currently is that when a consumer arranges a payment for, for example, utilities or childcare, he or she has to set up a direct debit.

But consumers have little control over this, as they have to share their banking details and personal information, which is not secure, and they have limited control over the amount to be paid.

For example, with a static direct debit, you must report any change in the amount debited in advance. You must then stop the direct debit and create a new direct debit, or make a one-off transfer.

Visa A2A allows consumers to set up variable recurring payments (VRP), a new type of payment that allows people to make and manage recurring payments of varying amounts.

“We want to bring bank payment methods into the 21st century and give consumers choice, peace of mind and a digital experience they know and love,” Mandy Lamb, Visa’s managing director for the U.K. and Ireland, said in a statement Thursday.

“That’s why we’re working with UK banks and open banking players, leveraging our technology and years of experience in the payment card market to create an open system where A2A payments can thrive.”

Visa’s A2A product is based on a technology called open banking, which requires lenders to grant third-party fintechs access to consumer banking data.

Open banking has gained popularity in recent years, especially in Europe, thanks to regulatory reforms within the banking system.

The technology enables new payment services that can be linked directly to consumers' bank accounts and authorise payments on their behalf, provided they have permission to do so.

In 2021, Visa acquired Tink, an open banking service, for €1.8 billion ($2 billion). The deal followed an abandoned bid by Visa to buy rival open banking company Plaid.

Visa’s acquisition of Tink was seen as a way to head off the threat of emerging fintechs developing products that allow consumers – and merchants – to avoid card transaction fees.

Merchants have long complained about the fees Visa and Mastercard charge for credit and debit cards, accusing the companies of raising so-called interchange fees and not directing people to cheaper alternatives.

In March, the two companies reached a historic $30 billion settlement to lower their interchange fees, which are charged to a merchant’s bank account when a customer uses their card to pay for something.

Visa did not provide details on how it would monetize its A2A service. By giving merchants the option to bypass cards for payments, Visa risks cannibalizing its own card business.

Visa told CNBC that it has always focused on providing the best ways for people to pay and get paid, whether that's through a card or another transaction.