MasterCard International's board has voted to give member banks the option of placing the MasterCard logo on the backs of their cards.
The move to "on-card brand flexibility," announced Friday, follows a Visa U.S.A. board vote on June 4 to test the concept on debit cards in a more limited way.
Both associations have been contending with the desires of the largest card issuers for more branding options. A rift on this issue led two of Citigroup's top executives to resign in February as directors of Visa U.S.A. Then Citibank indicated it would shift its loyalties toward MasterCard, where it subsequently was given a board seat.
Citibank officials, including co-chairman John S. Reed, one of the former Visa directors, have said little in public about their relationships with the two card associations. Mr. Reed and others have stated an intention to emphasize the Citi brand globally, and they view Visa's brand strength and related policies as a hindrance.
MasterCard officials have likewise steered clear of the Citibank-Visa controversy and focused on their own branding principles, hinting along the way that adjustments were in the works.
MasterCard president and chief executive officer Robert W. Selander said in a recent American Banker interview that it is in the association's interests to accommodate those who want to build up their own brands, with MasterCard continuing to set a strong card-acceptance standard.
If MasterCard "can build brand equity and have consumers naturally inclined to do more with you or to stay with you, that's in the interest of the shareholders," Mr. Selander said.
He was a bit more specific in a speech at the association's Asia-Pacific regional meeting June 10, saying that "further brand flexibility is inevitable," pending action by the board of directors.
Visa U.S.A.-now without Mr. Reed and Citi's global consumer chief, Robert I. Lipp, on its board-is now offering to approve logo shifts on off- line debit cards on a case-by-case basis for a one-year trial.
Visa International's board has decided not to make any changes in logo placement on credit cards for now, according to Visa spokeswoman Kristina Scott.
MasterCard said the option to move its logo is open to all issuers who could adhere to a few unspecified guidelines.
"It's for all committed MasterCard banks to help their portfolio and our portfolio, knowing and acknowledging that continuing to build our brand through marketing and advertising will continue," said Nicholas A. Utton, the Purchase, N.Y.-based company's chief marketing officer.
"We don't see this as a revolutionary step," Mr. Utton said. "This is an evolutionary rollout."
To be sure, both card associations' logos have receded greatly from the days when they occupied the entire face of cards.
In 1979, MasterCard ceded 25% of the card front to the members, and five years after that, 60%, the company said. Today the association logo has only 15% of the card face.
Mr. Utton said that as "the size of the logo has diminished ... acceptance has accelerated to 16.7 million locations, and the numbers of cards issued is at record levels."
MasterCard said numerous banks had requested the change, and larger issuers cheered it.
Michael Urkowitz, executive vice president and head of cardmember services at Chase Manhattan Bank, said it would help Chase achieve its goal of being a "branded global financial services company."
Mr. Urkowitz said, however, that Chase plans to move slowly and would start by testing different card designs and how they affect "people's decisions to take the card out of their wallets and use it," or whether to apply for the card at all.
The "issue is whether or not the Chase brand is sufficiently powerful so that it can stand on its own and not need the support of the Visa bug," he said.
Citigroup issued a statement that said, "We're pleased with the MasterCard decision and believe this flexibility will enable us to continue to build the Citibank brand."
Under MasterCard's guidelines, the size of the logo and hologram will remain unchanged no matter where it sits on the card. Issuers who want to move the logo to the back will have to agree to a number of conditions that would assure the strength of the MasterCard brand and a commitment to increase MasterCard issuance, the company said.
MasterCard said it conducted extensive customer research to make sure the change would not have a negative effect, but industry experts are concerned.
"The challenges are going to be very dramatic," said Michael Auriemma, president of Auriemma Consulting Group in Westbury, N.Y. "You've got to educate the consumer and the merchant to know where the logo is and that this card is the same and functions the same way as before."
Analysts were particularly worried about how the card would be perceived abroad, but MasterCard officials said all changes would be tested and monitored over time.
Banks will be able to break down their portfolios into regions or sections when they decide on card designs, Mr. Utton said. They might decide to shift the brand on just a part of their portfolios or in a cobranding relationship, he said.
"From an issuers' perspective, I don't think it makes sense to move the MasterCard or Visa mark to the back of the card," said James Shanahan, a partner in the Newark, Del., office of Business Dynamics Consulting.
"Both of these are in the top 100 brands around the world," he said, "and that kind of consumer awareness is not easily achieved. To disregard that asset and minimize its value just doesn't make sense to me."
