Visa Sees Dollars in Personal Payment Opportunity

Visa (s v) is throwing its hat into the personal payments ring by offering individuals the ability to send funds directly to Visa credit, debit or prepaid card accounts in the U.S. The move pits Visa against leader PayPal (s ebay) and start-ups like Square and Venmo and validates the market for personal payments, which is growing as consumers become comfortable with electronic payment systems.

Visa has long been a power at processing of point-of-sale transactions, but is now turning its eyes to the growing market for person-to-person payments. It previously enabled personal payment overseas but it’s now opening up the feature to U.S. users. Visa is enabling this feature by enhancing its VisaNet global payments network, allowing financial institutions to accept a new type of transaction. The company said it’s the first time in the U.S. that a major payment network has introduced a global requirement for account issuers to accept incoming funds. The service should go live by the second half of this year.

Users whose banks are eligible can enter a recipient’s 16-digit card number, email address or mobile phone number and transfer money from their bank account directly to the recipient’s account. Visa is partnering with person-to-person payment providers CashEdge and Fiserv (s FISV), who will be able to integrate Visa’s personal payment service into their services.

Visa’s move isn’t surprising, considering the changes in the market. PayPal is driving growth at eBay by enabling businesses and people to exchange money electronically. The company reported in January that it ended the fourth quarter with 94.4 million active registered accounts, adding approximately one million active accounts per month. PayPal’s net total payment volume was $26.9 billion in the fourth quarter, made up mostly of growth from its merchant services business. But while merchant transactions are obviously big business, PayPal is still proving that person-to-person payments are important as well.

Mobile payment start-up Square is also banking on the growing familiarity of electronic payments. The company said earlier this month that it’s processing $1 million in payments per day, up from a few million in transactions a week in the fall. Square sign-ups are now up to 100,000 a month, compared to 30,000 monthly sign-ups last fall. Most of that is smaller merchants, who don’t necessarily turn to traditional payment systems. But as CEO Jack Dorsey has said before, Square isn’t just about merchants but enabling person-to-person transactions. That’s still a small opportunity, but one that could grow significantly over time.

That helps explain Visa’s interest in personal payments. It has traditional point-of-sale transactions in place, but it’s in this new area of more personal exchanges of money that it doesn’t have much visibility. That’s not to say it will find easy success. PayPal is well-established and offers payment methods beyond just Visa. It’s also unclear what fees Visa will charge, which could affect the popularity of the offering. But the brand recognition of Visa could help propel the whole personal payment market, provided it gets the execution right.