Visa Inc.'s debit card payment volume declined again during the quarter ended June 30 as a result of a new debit network routing rule, but the worst effects of that trend are over, according to Visa CEO Joe Saunders.

The rule, prompted by the Durbin Amendment within the Dodd-Frank Act, caused Visa's U.S. debit card volume to fall 9.5% to $266 billion from $294 billion, Saunders told analysts in a conference call discussing earnings.

Visa's credit card payment volume during the quarter rose 9.8%% to $246 billion from $224 billion.

Combined with a steep payout for its share of settling a long-running antitrust case with merchants, Visa reported a $1.8 million loss during the quarter. Excluding the litigation provision and related tax benefit, Visa's earnings rose 25%, to $1.1 billion, from a year earlier.

The worst of this year's planned financial setbacks are over, Saunders said during the July 25 call.

Visa for two consecutive quarters absorbed a shock from the routing rule that took effect April 1, requiring issuers to provide merchants with the choice of at least two unaffiliated PIN-debit networks for processing transactions.

Visa's Interlink PIN-debit payment volume alone was off 54% during the most recent quarter, Byron Pollitt, Visa's chief financial officer, told analysts.

MasterCard, which reports its second-quarter results Aug. 1, has already said it picked up some market share as certain banks defected from Visa's Interlink PIN-based point-of-sale debit network to comply with the rule.

Resolving the antitrust case ends seven years of "contentious" dealings with merchants, Saunders said. Preliminary court approval of the settlement will likely come this fall, and Visa expects to implement its provisions early next year, he said.

In addition to paying monetary damages, the card networks will lift a ban on surcharging and will execute a short-term reduction of credit card interchange rates.

Certain merchants including giants Wal-Mart Stores Inc. and Target Corp. oppose the settlement, and on July 26 the National Grocers Association joined the National Association of Convenience Stores in opposing it.

But Visa's general counsel Josh Floum said the company is "very confident" the settlement will go through.

Healing Visa's sometimes-thorny relationship with merchants may take some time, however.

Visa has had something of "a love/hate relationship" with merchants in recent years, Saunders admitted, but the firm is ready to turn over a new leaf in dealing with merchants.

"We work with the merchant community through all of this, even as you talk about what's going on right now, or as certain merchants may complain about this or that, remember, we have incentive contracts with a significant number of them, and so we are working with them," Saunders said.

In repairing its relations with the merchant community, Visa is staking much hope on new technology, including, a digital wallet Visa is developing.

So far six "relatively large" merchants are on the system, and several banks are preparing to introduce it to consumers, he said.

Visa hopes to roll out in time for the holiday shopping season, Saunders said.

Transactions processed on CyberSource, Visa's online payments processing and fraud-prevention unit, rose 28.9% to 4.9 million for the 12 months ended June 30 from 3.8 million a year earlier, Visa said.

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