MasterCard Worldwide expects to increase its U.S. debit market share as a result of new network-routing rules included in pending federal changes in debit card interchange policies, Chris McWilton, MasterCard’s U.S. Markets president, said Sept. 23 at the company’s symposium for media and analysts at its headquarters in Purchase, N.Y.
In the U.S., MasterCard for more than a decade has not been able to secure more than a quarter of the U.S. signature-debit market, which Visa Inc.–the only other player–dominates. And MasterCard’s Maestro PIN-based point-of-sale debit brand, while popular in many other countries, is a small-bit player in the U.S. when compared with Visa’s Interlink brand.
A clause in the Durbin Amendment, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act that goes into effect next year, requires that debit cards display more than one company’s debit-network brands. The rule change represents a strong opportunity for MasterCard to take market share from Visa, McWilton said.
“This (rule) will dislocate the debit market (and cause it to) break up,” McWilton said, noting MasterCard has “far fewer” exclusive network-brand relationships with issuers than Visa does.
MasterCard is the most likely choice for issuers that must add a second brand to cards, McWilton contended. Issuers will ask themselves ‘“Am I going to go to a regional player that doesn’t have acceptance outside the U.S.? Am I going to go with another brand (with lower acceptance)?’ We think there is a heck of a lot more upside to this for MasterCard. It puts us in a bullish position,” he said, adding now is “a great time to be No. 2” in the debit market.
MasterCard also expects to reap more prepaid card distribution and purchase volume as an indirect result of the Durbin Amendment. Experts widely expect the amendment will result in a cut in debit interchange rates, causing banks to raise traditional demand-deposit account fees to offset those losses.
“Debit legislation is going to push an element of consumers out of the banking system” if banks add or increase debit and checking-account fees in response, McWilton said. “An element of consumers (will say), ‘I can’t do this, I’m going back to cash.’ We are advocating prepaid cards (for issuers) to take advantage of this legislation.”
MasterCard expects to secure a further debit card market-share boost next year as a delayed result of several major issuers’ debit card portfolios shifting this year to MasterCard from Visa, including SunTrust Banks Inc. and Chevy Chase Bank, McWilton said.
MasterCard experienced a market-share decline last year after Washington Mutual Inc.’s debit card portfolio switched to Visa from MasterCard when JPMorgan Chase & Co. acquired it, he noted.
“You will see (the opposite) effect when these recent deals begin to take effect,” McWilton said. “These deals will not make up all the (market share loss), ... but it takes care of a significant portion of the gap, and there is more to come.”
MasterCard has won several of its latest new card-issuing contracts on the basis of its data-analysis offerings and other technology issuers are using to help reignite credit card purchase volume, which slowed during the recession, he added.
“(Issuers are using) our data and analytics ... to segment customers and open up to new categories,” McWilton said, noting the company has identified pockets of strong growth in credit card use even throughout the recession, particularly in e-commerce.
“Credit is not dead,” he said, noting travel continues to drive strong U.S. credit card use. “Consumers are just using it more prudently.”
MasterCard also is “seeing a snap back in commercial (card) volumes as businesses get a little more confident,” McWilton said.
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