Latvia: Visa's latest experiment

Beginning Oct. 11, Visa card holders in Latvia were the first in the world to be able to carry out person-to-person money transfers using their charge cards.

Last week Visa International announced the beginning of a pilot project, dubbed Person-to-Person, under which money can be transferred from one visa card to another without the services of a corespondent bank.

Money tranfers, which cannot exceed 300 lats (500 euros), will be carried out in 3-5 days within the Visa International payment system.

Latvia's Parex Bank will coordinate the pilot project.

Anne Cobb, president of Visa International for Central and Eastern Europe, said at a press conference last week that the novel service would eventually become a global product for all Visa card holders.

To make a transfer, the sender must go to a branch of Parex with his or her card and fill out a payment order indicating the recipient's name and card number. The sender must also indicate method of payment: by credit card, by transfer from credit card (from savings account), or in cash.

After 3-5 days the recipient can then receive cash or simply leave the money on his or her Visa or Visa Electron card for subsequent spending.

Visa and Visa Electron holders in Latvia can send money to any place in the world (other than the United States), as long as there is another bank participating in the project at the other end.

According to Iveta Kelpe, public relations project director for Visa International in Latvia, the new system is attractive because it is reliable, easy to use, and rates are competitive.

The rate on a transfer of 120 lats will be 4.80 lats, or 4 percent, while a maximum transfer of 300 lats will cost 7.50 lats, or 2.5 percent.

By comparison, transferring 120 lats through Western Union at Latvian post offices will cost 13 lats, or 10.8 percent, while a transfer of 300 lats will amount to 19 lats, or 6.3 percent.

Several factors made Latvia the ideal testing ground for the project. According to Kelpe, the decisive factor was Parex Bank.

"Parex was the quickest and displayed the most motivation," she said. "They were ready to implement everything that was needed."

Also, Latvian Visa cardholders have displayed a remarkable enthusiasm for their cards. Last summer they spent more than $38 million on goods and services, while Estonians and Lithuanians spent only $11.1 and $10.3 million respectively.

Another important factor was the country itself. Latvia is small, dynamic and more open to new services, said Kelpe. And since the financial sector is highly competitive, banks are also more motivated to provide new services for their clients.

The project will last for six months, after which Visa International will analyze the results and identify its strengths and weaknesses.