Thursday, 3 November 2011

MasterCard In, Visa Out on Huntington's Debit Cards

MasterCard Inc. has won branding rights on the debit-card portfolio of regional bank Huntington Bancshares Inc., a coup for the transaction processor as it tries to steal share from larger rival Visa Inc.
Huntington said Thursday that it is replacing its customers' Visa debit cards with MasterCard-branded Platinum debit cards and expects the conversion to be done by Nov. 1. The portfolio includes about 1.5 million consumer and business debit cards.
"This is a big deal for us and a pretty big deal in the universe of card conversions as well," said Steve Steinour, chief executive of the Columbus, Ohio-based bank.
MasterCard, which has a small share of the debit-card market today, has been working to increase that business in the face of new federal restrictions on fees. The company said it is continually pursuing potential deals with banks but has no other U.S. debit portfolio wins to announce in the near term, said Chris McWilton, president of U.S. markets at MasterCard.
Huntington's debit-card customers made $6.7 billion in purchases in 2010, according to Nilson Report, a payments industry newsletter. MasterCard's U.S. debit purchase volume was $333 billion in 2010 compared with Visa's debit purchase volume of $1.05 trillion, according to Nilson.
A spokesman for Huntington declined to say how long its contract with MasterCard lasts but such agreements can run five to seven years in some cases. Financial terms of the contract weren't disclosed. The deal doesn't affect Huntington credit cards, which are issued by a Bank of America Corp. unit and include Visa's and MasterCard's brands.
While the logos of Visa and MasterCard appear on banks' credit and debit cards, the companies don't lend to consumers. Rather, they help process transactions made by the customers of their client banks.
"The more debit cards that have MasterCard's logo on them, the more payment volume and transactions MasterCard will be processing, and therefore the more revenue and profit MasterCard will be earning," said Jason Kupferberg, an analyst with Jefferies Group Inc.
A Visa spokesman declined to comment.
Executives at Purchase, N.Y.-based MasterCard and analysts have said its efforts could get a lift from the Durbin amendment, a provision in last year's Dodd-Frank financial regulation law that ushered in new rules for debit-card processing.
In addition to capping the fees that banks can charge merchants when a customer swipes a debit card, it also included provisions that require banks to offer merchants multiple processing options on their debit cards. The rationale for the requirement is having more options would create more price competition, saving money for merchants.
The so-called network exclusivity provision is expected to affect Visa more than MasterCard because Visa has more exclusive processing relationships with banks. MasterCard, which operates a debit processing network called Maestro, could win more deals as a result, analysts said.
MasterCard reports its earnings Nov. 2.
Visa's debit network, Interlink, will likely lose a portion of its transaction volume as a result of the regulations, Joseph Saunders, chairman and chief executive of Visa, said during the company's earnings conference call Wednesday.
But Mr. Saunders said he is confident pricing changes the company is rolling out will help Visa maintain its top position in the market.


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