Visa U.S.A. is turning its attention to a contentious side of the card business: merchant acquiring.
The San Francisco-based card association has hired a former IBM executive, Bond R. Isaacson, to be executive vice president of member and merchant relations, a new position.
Mr. Isaacson, who will join Visa in April, will be responsible for "bringing into focus the synergies that exist between banks and merchants," said William Stewart, executive vice president of systems and operations for Visa U.S.A. He will report directly to Carl F. Pascarella, president and chief executive officer of Visa U.S.A.
The assignment reflects a decision by Visa to focus more squarely on merchant acquiring, an increasingly controversial side of the card business. Retailers and other companies are upset that the fees they pay to Visa and MasterCard International to accept bank cards are rising.
"The merchant community is hopping mad at Visa and MasterCard," said Mark Abbey, a principal in First Annapolis Consulting in Linthicum, Md.
Visa hopes to change that. Under Mr. Isaacson, the association plans to increase the resources it dedicates to the merchant side of the business to 50% of its assets-up from 40%. Today, Visa dedicates about 60% of its capital and other resources to serving its bank members.
"It is a smart move for Visa to pay more attention to the acquiring side," said Frances M. Dale, president of Entandem Inc. of Sterling, Va.
At the heart of the merchant acquiring business are discount fees-the price merchants pay banks and other processors to accept and clear card payments. Those charges are based on so-called interchange fees, which are set by Visa and MasterCard. Industry sources estimate that interchange fees represent about 76% of discount fees.
Over the past two years Visa and MasterCard have increased interchange fees substantially, raising the ire of many merchants. Indeed, some are exploring alternative payment options to Visa and MasterCard.
Others, including heavyweights Wal-Mart Stores Inc., Sears Roebuck & Co., and The Limited Inc., have filed an antitrust class action against the card associations, claiming that Visa and MasterCard unfairly tie their credit and debit card pricing policies. These retailers maintain that debit card transactions should be less expensive because they are less risky.
As part of its plan to smooth merchant relations, Visa will offer merchants consultative services to address a variety of issues.
"We are trying to put in place a relationship that does consultative selling to both banks and merchants," Mr. Stewart said.
For example, Visa may facilitate an alliance between banks and merchants, similar to the role it played in cobranded card deals. Grocery stores' frequent-shopper cards may one day have a smart card Visa chip, or Visa may advise retailers on simplifying the check-out process by reducing the number of payment options offered.
"Our job is to displace cash and checks," Mr. Stewart said. Ultimately, Visa wants "the majority of the cards merchants accept or process" to be Visa cards, Mr. Stewart said.
Mr. Isaacson's job will be to broker many of these deals. The 41-year- old executive spent 19 years with IBM in Charlotte, N.C., where he was responsible for computer giant's relationship with the old NationsBank Corp.
He also played a role in the formation of Integrion Financial Network, a home-banking and electronic commerce joint venture of 18 banks in the United States and Canada.
"Bond is a professional salesperson," Mr. Stewart said. "He brings 19 years of (experience) selling to the financial industry ... and we are going to put all the weight" behind his efforts.
