Visa is distancing itself from some of the practices of its great rival MasterCard as both face ongoing accusations that they are over-charging retailers on transaction charges.
Over the years they have been accused of working rather monopolistically but not any more as Visa is looking to land a few punches on MasterCard.
Visa executives are becoming vocal about how MasterCard is playing dirty with retailers and how the interchange fee that it charges them on credit cards is higher than that of Visa.
It’s complaint is that often the two companies fees are ‘blended’ together and that it is therefore being tarnished by MasterCard’s higher fees in the eyes of regulators and retailers.
Stephen Perry, an executive vice president at Visa Europe, also reckons it is “absoutely wrong” to launch ‘upscale credit products’ such as the World MasterCard payment card – which have particularly onerous transaction charges for retailers.
He even suggests that such payment cards are the “achilees heal of Visa Europe” as they are doing damage to the broad relationship between merchants and the card schemes. It is interesting to see Visa take the high ground and stick the boot into its rival.
This aggression is probably a move by Visa to focus on its debit card business (it handles 94.2% of all such transactions in the UK) and let MasterCard scrabble around for credit card business (it has 60.1% of credit transactions in the UK). [Source: Payments Council – UK Payment Statistics]
This is a canny move because it is credit card fees that are coming in for the most flak from regulators and the EU Commission. And it is a declining market.
Just take a look at the recently released ‘Cost of Collection Payment Survey’ from the BRC, which showed the proportion of transactions using credit cards fell by a hefty 12.9% in 2010. Meanwhile payments involving debit cards rose from 29% to 34% of all transactions.
It’s clearly a sensible move by Visa to distance itself from the extortionate credit card fees and instead focus on protecting its debit card business. It currently has an attraction to putting its money into things like contactless and mobile payments.
And expect it to turn up the heat even further on MasterCard as it is looking for ways to incentivise sales assistants in retailers to proactively ask customers for Visa rather than MasterCard plastic.
It is highly unlikely that it will be able to pull this one off but what it has definitely pulled off are the boxing gloves and it is MasterCard that is its punch bag.