* Online 'very different' from point of sale -CEO
* Visa, MasterCard often follow each others' moves -analysts
* PayPal may be more of a threat in physical stores
By Alistair Barr
SAN FRANCISCO, March 20 Visa Inc Chief
Executive Charlie Scharf suggested on Wednesday that the payment
network may impose a fee on digital wallet operators like
PayPal, following rival MasterCard Inc.
MasterCard said earlier this year that it plans a new fee
for digital wallet operators starting in June.
PayPal is not an official payment network in its own right.
Instead, when people use PayPal to pay for something, the
purchases are funded from their bank account or their credit and
debit cards. Because of this, PayPal already pays huge amounts
of fees to Visa, MasterCard and American Express whenever a
PayPal purchase is funded with a credit card bearing those
Shares of eBay Inc, owner of PayPal, the largest
digital wallet operator, have been hit hard on concerns other
payment networks may roll out similar fees, cutting into
"I think it is totally appropriate to do that," Scharf said
during the Barclays Emerging Payments Forum on Wednesday, when
asked if Visa was planning a digital wallet fee.
Digital wallets are electronic versions of real wallets that
store card and bank information and can be used to buy things
online quickly and anonymously. These digital wallets are
increasingly moving into the physical world, through consumers'
use of smartphones while shopping in retail stores.
PayPal is moving from its online roots into the physical
retailer world, where the vast majority of payments still take
place. It is a big opportunity for the business, and that has
driven eBay shares higher in the past year.
However, as a payment option in lots of physical stores,
PayPal will be a bigger threat to networks like MasterCard, Visa
and American Express, analysts say.
"Some of the people we compete with started out as one thing
and they morph into another thing, and doing things online is
very different than doing things at point of sale," Scharf said
"We are always thinking about those relationships and they
have changed," he added. "And if they changed enough that we
think it warrants us to change something with us, we will do
A Visa spokesman declined to comment on Wednesday.
The MasterCard fee will be charged on "staged" digital
wallets, such as PayPal, Google's Wallet, Square,
iZettle in Europe and Intuit Inc's GoPayment, according
Staged digital wallets typically share less information with
card issuers and the networks, creating customer service
problems and making it more difficult to deal with card rewards
programs, analysts say.
"Allowing data to be passed through to our issuers and then
not allowing data to be passed through to our issuers makes us
re-think about our pricing and our rules," Scharf said on
Gil Luria, an analyst at Wedbush Securities, said it is
"inevitable" that Visa will follow MasterCard's move and
introduce a digital wallet fee of its own.
"This is a fully functioning duopoly. When one does
something, the other one follows suit," Luria explained. "It was
MasterCard's turn to exercise its market power. If they are
allowed to do it then Visa will follow."