What happens when the referee puts on gloves? | TWIF UK and EU

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Hello fintech friends,

AI continues to dominate the news cycle and in consequence dominates the world of fintech. From tokenmaxxing to regulatory capture to Cybersecurity, I think that in recent days, months, weeks and maybe even a year, a lot of unusual activity can best be explained under the reactionary light of AI.

Take Visa’s 2024 acquisition of PISMO for example. At first glance it really doesn’t seem to make sense. Whilst PISMO is objectively a core banking platform it still has enough of the trimmings of an issuer/processor that, at first glance, the move could be seen to be eating its own ecosystem. Visa, after all is a knitting together of two distinct parts of the same ecosystems; Payers and Payees.

Whilst nobody could argue against the fact that Visa has hit critical mass and so adoption is assured no matter what they do, it still begs the question: why would a scheme that already has major skin in the game as a neutral network, decide to buy an entity that is effectively a competitor to all other participants on its network.

In this light I think there are still a lot of questions to be answered, but I think the dust settled through 2025 and now the GTM is becoming clearer, I’m not sure this was ever a processing play.

Whilst not obvious then, it’s clear now that we are going through a technology change driven by AI that is going to disrupt everything. Throughout such a disruption, agnostic schemes are threatened not from the top down but from the bottom up. In this case, consumer behaviour.

Consumer behaviour is beginning to change faster than ever. I personally stopped going to google to buy things a long time ago. Now I use my AI to recommend a list of things I am interested in. And it won’t be long before I start complaining that the buyer's journey can’t be completed Agentically via the same AI.

This is the same feeling most likely half of Visa’s workforce have experienced over the last few years, and everyone is now starting to understand that a change is underway.

The problem for Visa in their journey to innovate in the AI age is that most of their key volume holders on the issuing side of the network don’t own their own core technologies. They are likely outsourced to technology providers like Temenos, First Data Fiserv and the likes. That means when Visa (or any scheme) tries to innovate to stay relevant, they are chained in lockstep to their largest issuer to encourage adoption. And their largest issuers are the customers of (and beholden to) third party technologies all of whom have their own technical debt, organisational inertia, staff turnover, and day to day businesses to run.

In short, when visa wants to get ahead of the competition with a bold new product, it needs to coax a long chain of organisations along with them, and progress is only as fast as the slowest link in the chain.

Most of us have at one time or another had to force a supplier and a customer onto the same call to try and iron out a wrinkle where you depend on both. And we know how frustrating it becomes when you can clearly see that the incentives for both have 0 alignment. Now imagine that position when you are Visa, and say Nike are pushing you to try this new payment feature but you need JP Morgan to agree to the flow and they need I dunno First Data to build this feature to enable deployment.

That’s the kind of ecosystem incoherence that a scheme has to preside over. In this light it makes total sense that Visa would elect to acquire a core banking technology and sell it to their issuers. To avoid the delays in adoption that persuasion alone can’t solve.

By owning the core banking layer, in theory, Visa can enable new features on their scheme much more rapidly. However this is a thesis lightly held and will take a decade to validate. So… let’s see where it goes!

- Daniel Cronin

Word of the week: Sesquipedalian: an adjective used to describe a word that is very long and multisyllabic, or a person who habitually overuses long, complex words.

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