Visa Explores Automatic Payments Via Blockchain

Visa is exploring ways to allow automatic recurring payments through a blockchain like Ethereum.

Blockchain adoption is increasing but setting up automatic recurring payments is a challenge because some digital wallets require engineering work to allow pull payments, according to a technical paper posted on the Visa website.

That’s a problem that needs solving, because consumers want the convenience of automatic recurring payments — to the extent that 30% have changed the way they pay bills within the last two years, with many saying convenience was the reason, according to the paper.

While making that change is simple on a banking app, it’s more difficult on some digital wallets, the paper said.

“Ethereum supports push payments but doesn’t natively support pull payments — auto payments are an example of pull payments,” the authors wrote in the technical paper.

The authors explored using smart contracts for self-custodial wallets to eliminate the need for the user to actively participate and push payments each time, instead enabling the smart contract to pull funds automatically.

Account abstraction (AA) proposes that user accounts be made to function like smart contracts and that more flexibility can be allowed in validating transactions on the blockchain, according to the paper.

“Essentially, AA allows for programmable validity to verify and validate any blockchain transaction,” the authors wrote. “This means that instead of hard coding validity conditions into the Ethereum protocol that will apply to all transactions in a generalized way, validity conditions can instead be programmed in a customizable way into a smart contract on a per-account basis.”

The authors proposed leveraging AA to create a new type of account contract, which they called a “delegable account,” that would include a pre-approved allow list.

Beyond recurring payments, this solution could support pull payments of all kinds, the authors wrote.

Ethereum does not yet support AA, so the authors implemented their delegable accounts solution on StarkNet and found that it enabled auto payments for self-custodial wallets.

“At Visa, our goal is to help create better user experiences leveraging existing as well as new payment rails,” the authors wrote. “To that end, we believe that programmable money and programmable payments represent an exciting opportunity.”

PYMNTS research has found that many consumers are embracing convenience features such as automatic payment on the due date.

In fact, the greatest share of consumers of all income levels — 39% — pay their recurring monthly bills using automatic payment on the due date, whether via a bank’s bill payment system or the biller’s website, according to the PYMNTS report “Streamlining Bill Payment.”

Convenience drives some consumers to store their payment credentials with merchants, while security concerns give other customers pause. For “How We Pay Digitally: Stored Credentials Edition,” a collaboration with Amazon Web Services, PYMNTS surveyed 2,102 U.S. consumers to analyze consumers’ dilemma and reveal how merchants can win over holdouts.

December 22, 2022