• Sonia Chui

‘Payments are a two-sided network’: Interview with Anthony Craufurd (Director of Visa Ventures)

Updated: Mar 24

As part of the 'Businesses after COVID-19' webinar series, UCL FinTech Society interviewed Anthony Craufurd (Director at Visa Ventures).


Sonia Chui covers key discussion points about business strategies within the payments industry, the rise of e-commerce and venture capital investment opportunities in this interview transcript.


Visa’s business model


1. Could you tell us a bit more about your role as Director of Visa Ventures?


My current role is in the venture organisation, helping Visa find and identify startups across Europe, building commercial partnerships with them and figuring out how to work together as well as making equity investments.

2. Has the coronavirus changed Visa’s strategies? WIll its business plans change in the event of a second wave?


We have the benefit of being in an industry that is fairly slow moving. Contactless at the moment has been talked about as a ‘great success’ but the first contactless transaction started in 2007. That has taken us over 10 years to get to where we are now where even now it’s still not the default. 


The long term strategy is about growing digital commerce and creating the best way to pay and be paid. Some of the tactics might change: in the short term, SMEs are being forced to go online for the first time with the drive towards multichannel commerce. There are huge opportunities to help businesses make this transformation.

3. What is Visa’s philosophy when choosing potential companies to invest in? Is it possible for Visa to invest in an early-stage startup?


We are pretty clear where we stand as Visa. We are directly investing from balance sheets: every dollar we invest in a startup is a dollar we could have used to do share buybacks so we have to make the case to our shareholders that it is a better investment of their money to invest in a startup. If we are going to be making that case, our CFO wants us to know that we are investing in proven companies who are going to return the equity and it will have an impact on Visa’s top and bottom line and drive revenue. We sign partnerships and are investing on that basis. 


We are never going to be a seed-stage angel investor. In general, many corporates do not do seed investments. As a seed-stage company, you have a very unknown future. Your product in 2 years’ will be completely different from the one today. It will not have a sufficient scale to move the needle for Visa so it’s difficult to get the attention that you would want for your company to be successful.


4. How can companies attract the attention of Visa’s venture arm?


After a few years, if you’ve gone from having a million dollars of revenue to ten million dollars of revenue and now you’re moving billions of dollars of payment volumes or impacting a billion dollars of payment, this gets exciting enough for Visa to commit to an investment.


For us, and talking to most corporates, you need to find what their revenue drivers are and their key metrics. For Visa, payment volume is the headline. Then you can make sure you’re a big enough scale to be important enough for them. I love talking to early stage startups. The enthusiasm and the opportunities are incredible but it’s difficult to get the Visa machine to commit to that. Some other corporates will have an arms-length approach fund with a single LP and they might be better vehicles because they have more independence and more benefit to take the risk early. But you won't really get the synergy and the benefit of the big corporate backer behind it. 


A final comment I will say is that you’d rather take non-diluted revenue from a big corporate than equity investment. So if you can go and sign half a million dollar a year contract from a bank, that’s much better than taking half a million dollars of equity investment.


5. Why would a company choose to work with Visa?


It’s the promise of scale -- we operate 163 currencies, countries all over the world, moving hundreds and trillions of dollars moving around -- and we are one of the few companies in the world who can talk about ‘trillions’ which is in fact quite an exclusive club. 

The effects of COVID-19 on Banks and FinTech companies

6. Could you outline how business opportunities in Banking and FinTech have changed, comparing the beginning of the crisis to the position we are in right now?


By act 1, there’s the financial crisis brought about by the virus and everybody is preparing in their battle stations. Sequoia Capital put out a memo on protecting the health of businesses at that time. Everybody was triaging and firefighting. By act 2, we hit a pause through April and May where everybody was wondering if the ecosystem will recover. It was easy to just say ‘we’re going to wait one more week’. In the last month, everybody is now reopening and recognising that we are in this for the longer haul: we have a 12-month problem and not a 12-day problem Now, everybody is evaluating what opportunities are available.  ‍

We can see that this crisis is acting as a catalyst for a lot of the changes that were already in flow. These are a lot of the issues that we were already seeing in banking and fintech. This brought a lot of them to the front. For a lot of the big traditional banks, this forced them to make large decisions.

7. Are there any ‘crazy’ behaviours or observations that have surprised your expectations given this current health and economic environment? 


I don’t think anything has gone crazier than expected. We’ve seen some weird behaviours that are not going to continue. In Germany, we saw consumer loans defaults drop. We saw a short term spike in savings rate in a lot of European countries. The common logic of expecting recessions, mass redundancy, high loan loss performance and defaults suddenly did not happen in the consumer industry as consumers were putting money away and paying their debts. The reaction of national governments to create mortgage holidays actually cushioned the blow for the majority of people. 

Where we have expected to see a surge of people moving to alternative lenders of credit is actually been the best opportunity for a lot of incumbents to fend their patch and look after their high quality customers. In payments, we see a great acceleration as a lot of people are worried about hygiene issues with cash. The growth of e-commerce has been beneficial for Visa. But on the negative side, nobody is travelling and this may continue for 12 to 24 months at least. 


8. Given the current situation, do you think there is a difference in how payments are handled in Europe compared to Asia where there is higher adoption of contactless payments in the latter? What are the challenges being faced right now?


Payments is a two-sided network. If you ignore the technology that’s being used and you just look at the power of each individual network, it is increasingly about where you have the density and the activity. If you look at WeChat pay and Grab in China and SouthEast Asia respectively, they built incredibly dense networks but they are all domestic. They have huge transaction volumes with very low fees and it works within that ecosystem.

At Visa, we have the same kind of effect in places like the UK and the Nordics where we have high card penetration and e-commerce. Our existing business is to increase those numbers with the hope of being used in as many places as possible and being the preferred customer choice. 


The challenges are the same everywhere. An economic slowdown means that everybody will be spending less money and payments companies everywhere will be looking to retain volume in transactions. The advantage in Europe is that there’s a lot of physical infrastructure ingrained in every shop. Ignoring the recent court cases [with Wirecard], there is also a symbiotic relationship between banks and merchants. The challenge is now finding the shared middle ground and keeping innovation moving. 

Advice for students


9. Why should students choose a corporate career? What do advice do you have for them?


We get a huge amount of benefit standing behind the Visa brand. This gives tremendous access above and beyond any individual reputation. It can be a huge accelerant especially when you are younger in your career and haven’t established credibility yet. In order to make the most of this leverage, you need to work with that organisation to bring that with you. 


10. Any final takeaways?


The FinTech and Banking industry is about to change a huge amount. They are in a stressed and difficult position right now so it will be hard but the opportunities are astronomical. Looking at the news with companies like Wirecard, there are opportunities to do things better. 

Watch the full interview: