magine a new consumer marketplace that is growing at more than 30 percent a month and is projected to reach $220 billion by 2001. Imagine that the business-to-business prospects for the same marketplace are even greater. Finally, imagine that none of the sellers in this marketplace accept cash. In a nutshell, that's the enviable prospect faced by Visa International, the world's largest consumer payment system, as it stakes out its claim in the Internet marketplace.

"Technology will undoubtedly shift the competitive landscape for Visa and its members and will bring us new competitive challenges. Even with more than 600 million Visa cards and a 58 percent global market share, we believe that a strong position in on-line commerce is critical to our long-term success," says Todd C. Chaffee, Visa's executive vice president, Corporate Development & Alliances. "To maintain this market leadership, we must do more than leverage the Visa brand in the emerging electronic marketplace. We must actively harness technology and evolve with it. That's one reason why we've been so active in building alliances with leading Internet technology companies and supporting the development of secure transaction methodologies."

Visa is particularly active in two areas of Internet commerce development: building a secure global infrastructure and forging strategic partnerships with high-profile Internet technology companies. On the infrastructure front, Visa has pioneered the Secure Electronic Transaction SET™ technology, an Internet commerce standard of security and authentication that builds on Visa's vast secure infrastructure in the physical world.

"SET is an open specification developed jointly by Visa, MasterCard and technology leaders like Microsoft, Netscape and IBM that will boost consumer confidence in on-line transactions-a factor that is crucial to continuing growth in on-line commerce," Chaffee says.

Visa has also been active in the development of smart cards, which are credit or debit cards with a built-in microprocessor and memory to authenticate and secure financial transactions. Smart cards can be loaded with digital money or "stored value" that can be spent until the balance is zero and then reloaded. Visa is already the leader in smart cards with more than 21 million smart cards issued through 70 programs operating in 30 countries around the globe. By the year 2002, more than 30 percent of all Visa cards will have a chip on them. Visa's technology approach for smart cards is based on the flexible and secure Java Open Platform from Sun Microsystems. Using Java allows Visa members to choose their hardware and software vendors and dynamically update a customer's card without reissuing, thus reducing costs and time to market.

Visa has also formed relationships with some of the best-known names on the World Wide Web, including Yahoo!, the Internet's most popular search and content service. As the first on-line navigational guide to the Web, Yahoo! is the largest site in terms of traffic, advertising and household reach. It is also one of the most recognized brands associated with the Internet. Under the relationship, Visa is a key marketing and technology partner to Yahoo! and one of its major shareholders.

Last fall, Visa and Yahoo! launched the Visa Shopping Guide by Yahoo!, a new service that simplifies online shopping and provides access to thousands of on-line and off-line merchants. The guide features 25 of the most popular product and service categories for on-line shopping, including everything from apparel and travel to toys and outdoor equipment. In February, Yahoo! and First USA Bank launched a new Visa credit card targeting Internet users. The card has a low interest rate and can be used to earn discounts with such on-line merchants as and CDnow.

Last year, Visa also forged alliances with Point-cast Inc., the well-known Internet-based-information service; NewsHound, a customizable on-line news search and retrieval service; and Ariba Technologies, a leading provider of electronic purchasing software for large enterprises.

Other strategic alliances and equity investments include a partnership with VeriSign, which provides digital certificates to both parties of a transaction — a critical component in the electronic commerce infrastructure-and Open Market, one of the leading suppliers of merchant server software systems.

On the business-to-business front, Visa is actively promoting its market-leading Visa Purchasing card, a commercial payment card that enables companies to streamline the purchase-order process for small purchases. More than 75 percent of FORTUNE 500™ companies use purchasing cards to help monitor and contain costs. A recent survey by Thomas Register and Visa found that the number of companies that plan to use the Internet for the majority of their buying is expected to double by the year's end. Just over 20 percent of the respondents said they plan to make more than half of their purchases over the Internet by the end of the year.

Visa is also paving the way for on-line business transactions through the Visa Business card, a product for small-business owners that provides greater convenience and control of expenditures than cash or checks. With the Visa Business card, small-business owners have the ability to set purchase and cash spending limits for authorized employees and can enjoy the increased convenience that results from the acceptance of Visa cards compared with business checks.

"The Internet has enormous potential," Chaffee says. "At the moment, the business-to-business electronic commerce marketplace is just beginning to take shape. It's just a matter of time before Internet commerce solutions become an integral part of mainstream business around the world. The economics are just too compelling to ignore. There is a lot of room for growth here, and Visa intends to continue its market leadership on behalf of its 21,000 members worldwide."


Reprinted from the April 13, 1998 Issue of FORTUNE