Evan Schuman's StorefrontBacktalk

When Visa rolled out its location-based mobile coupons service—with apparel chain Gap as its first client—it did so with a twist. Visa uses POS transactions to track a customer’s location, so it doesn’t have to cooperate with mobile operators or merchants. It doesn’t have to deal with geolocation challenges like the inaccuracy of triangulating cell towers. It can even collect location information from stores that have nothing to do with its coupon program—including competitors of the retailers that do. It doesn’t need customers to have smartphones, Wi-Fi or GPS, nor do these capabilities have to be turned on.

Most current mobile-payment approaches—including the mobile wallet Visa announced this week—are still based on the payment-card accounts Visa currently makes its money from. But eventually someone will come up with a better way and leapfrog over the card companies. Then Visa will be stuck with a large, expensive network for real-time transaction processing. That could explain why Visa wants to use its new service to follow cardholders around from one retailer to another. And this all comes as Apple and Google face increasing heat for tracking the locations of their smartphones’ users.

This approach might seem like a stretch for the world’s biggest payment card brand, but it’s one of the latest signs that even Visa knows interchange can’t last forever. Need another clue? Consider Visa’s investment in Square and some of the theories about its reasoning.

Visa’s mobile coupon service, which Gap stores have been piloting since November 2010, works like this: Customers who have signed up for the program are sent offers via a mobile-phone text message immediately after they use their card in certain ways, such as at a store within a particular ZIP code or during a specific time. They then redeem that offer at Gap by showing a Gap associate the text message.

That hardly sounds exciting or unusual, except spotting transactions within a particular ZIP code means Visa has to be able to identify the location where a transaction took place, and do it in real time. That means as soon as a customer uses a card, Visa calculates the location and knows where that customer is.

It’s not exactly what retailers say they’d like, which is to know when a particular customer enters the store. With that information, the retailer can send an offer when the customer arrives, rather than after the customer has already checked out. But that’s based on the assumption it’s the retailer that has to keep track of the customer—and the retailer’s tracking capability largely ends at the store’s doors.

Visa, on the other hand, can watch every transaction with the customer’s card, looking for opportunities to send an appropriate mobile coupon. As soon as Visa spots a customer charging a purchase in any store that’s close by a Gap, Visa can send a Gap mobile coupon to the customer. That can happen before the customer walks into the Gap store—and it may even push the customer toward the store.

By using POS transactions to track a customer’s location, Visa’s approach is more limited than location using cell towers or Wi-Fi signals. It only starts working when a customer uses the card. But Visa doesn’t have to deal with the nightmarish issues that have haunted retailers toying with mobile, especially the interactions with mobile carriers.

And unlike Apple and Google, Visa doesn’t have to let customers turn off the service. Visa can cite card-transaction authentication as justification for knowing where each transaction is made. The card brand actually has a fundamental business reason for tracking its customers.