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PayPal's newest U.S. competitor: Visa

If you have a Visa card, you'll be able to receive and transfer money directly to others using that account, beginning this summer.

Visa announced the new personal payments service — which should feel familiar to anyone who's ever used PayPal — yesterday, with implementation in the U.S. scheduled for the second half of this year.

The service will work through CashEdge and Fiserv, which already provide electronic person-to-person payment, account transfer and bill payment services. CashEdge and Fiserv will have access to VisaNet, "enabling them to integrate the Visa personal payment service into their respective person-to-person platforms — Popmoney and ZashPay. This will allow a participating bank's customers to send money directly to a Visa account."

But for you, the customer, this should work pretty easily: "By simply entering the recipient’s 16-digit Visa account, e-mail address or mobile phone number, consumers can send funds directly from their bank account to a recipient’s Visa account." But you do need to go through your bank first to set things in motion.

Not all cards will work — Kelly Alpert, senior business leader for Visa personal payments, said pre-paid gift cards would be ineligible for the service. But most Visa products, such as debit, credit and reloadable pre-paid cards, would work in this service.

Elvira Swanson, senior business leader in global corporate relations, said that those who don't know those 16 digits (and that's probably a lot of us) will be able to send money using a recipient's e-mail address or mobile phone number. Once the person gets an alert, they can release those funds by directing it to their Visa account.

Swanson also said the same security layers that apply to visa payments at points of sale would also apply to these transactions.

Visa personal payments has already been in use outside the U.S. through more than 70 programs around the world, which has been in place since about 2005.

The company being tardy for the party means it's going to have to cover a lot of ground to catch up with PayPal, which serves as the primary tool for eBay customers to do transactions. 

VentureBeat reported that PayPal's revenue shot up 22 percent to $971 million during last year's fourth quarter, compared to $796 million during the same period last year. The numbers are impressive: 94.4 million registered PayPal users at the end of last year.

But Visa's numbers are even more behemoth: 1 billion cards worldwide that can be used for these transactions.

Alpert said, "That connectivity and reach is our true asset. That is the key differentiator with Visa." 

So far, the potential threat from Visa hasn't seemed to ruffle any feathers over at PayPal, which told The Wall Street Journal:

"As the leader in global online payments for the last twelve years, PayPal has unmatched advantages that we believe put us ahead of the competition. PayPal connects to 57 different financial networks and 15,000 local banks in 190 markets — not just in the Visa network, but with payment methods that meet our customers’ preferences in markets around the world."

And while Visa is still unavailable for a few months, its other competitors, such as Square, will continue to reap the rewards of being a PayPal alternative. The Square card reader allows users to turn their smart phone into a card-swiping payment tool. The company told Ars Technica it gains 100,000 new account signups every month.

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