MasterCard chief executive Alex W. Hart has beat a mild retreat from his year-earlier claim that banks can earn more by issuing a MasterCard than a Visa card.
Mr. Hart made the controversial assertion at the bank card conference of the American Bankers Association last year, adding that he would soon have evidence to prove the claim.
He also said that MasterCard, which is perennially a runner-up to Visa USA, will soon prove that member banks are rewarded with yields 30 basis points higher than they get from a Visa card.
Advantage Not Cast in Stone
At this yeat's card conference, held earlier this month, Mr. Hart gave a progress report on his quest to prove the profitability advantage. It was hardly definitive.
"We asked our people to go back and to see if we couldn't find a path that would define a 30-basis-point advantage for MasterCard relative to Visa," he told conference attendees.
"I will tell you that we haven't [found] it yet, although we see some very encouraging signs."
Mr. Hart used the occasion to tout his group's Master Model program, which is designed to help banks calculate the costs, benefits, and bottom-line profits of issuing credit cards.
MasterCard said that 140 financial institutions are using the program.
In Praise of Revolving Credit
"I would hope that by next year we'll be able to give you a far more definitive sense of where your associations can provide comparative benefit and perhaps give you some direction going forward," Mr. Hart said during his annual state-of-the-associations address.
The executive's address last year caused a storm of controversy - and an angry rebuttal from Visa.
That didn't stop Mr. Hart from rebounding this year with a claim during a convention interview that MasterCard is more appealing than Visa to banks' favorite customers - those who revolve their credit card balances.
Mr. Hart said that 67% of all dollars charged with MasterCards in 1991 revolved, in contrast to 61.5% of all dollars charged with Visa cards.
He attributed the discrepancy to the large audience of airline affinity card customers that Visa cultivates.
The airline programs tend to attract "convenience users" who tote up big card charges only to obtain frequent-flyer miles. Many of them pay their bills in full each month, Mr. Hart said.
Reminder on Interchange Rates
In another pitch to members, he reminded them that MasterCard is realigning its interchange rates - the bank-to-bank fees that strongly influence what merchants pay to accept credit cards - to reflect the actual cost of doing business.
In the interview, Mr. Hart cautioned: |You're not going to see any dramatic rise in interchange in the short term."
But he said MasterCard is aiming for a 45-basis-point increase in interchange so that issuers can recoup more of their costs.
Addressing the conference audience, he said that issuers are "entitled" to higher interchange fees. "We want it," he said. "We'll work to get it there."
