WALL STREET – Visa and MasterCard shares soared yesterday after the Federal Reserve lifted the air of uncertainty over the debit card market and passed new rules that will mean more revenues for the two card networks.
Shares in Visa surged 15% and MasterCard by 11% after news of the Fed’s debit rule broke, while stocks for PayPal’s parent eBay, for Discover Financial, American Express and other payment companies advanced sharply for the day after the Fed’s ruling.
For the Fed’s ruling raising the proposed cap on debit fees to 21 cents per transaction will not only mean billions more in debit revenues for banks and credit unions, but also companies that process the payments, like First Data Corp., Fiserv and Fidelity National Information Services.
The Fed’s new rule and its exclusivity provision means that all credit unions and banks must have two network agreements, meaning thousands of institutions will need to join new networks. CUNA estimated credit unions have exclusive network arrangements so they will all need to join a new network.
But credit unions also profited from the run-up in Visa and MasterCard shares because credit unions hold hundreds of millions worth of stock in the card networks, the only publicly traded stock they are authorized to hold.
Shares in both Visa and MasterCard closed at 52-week highs yesterday, with Visa closing up $11.39 at $86.57 and MasterCard gaining $31.47 to close at $309.70.
Major bank debit issuers also reported big gains, with Citigroup shares rising $1.35, or 3.4%, and JP Morgan Chase 91 cents, or 2.3%.
The big issuing banks joined community banks and credit unions to fight the cap in debit fees, which will reduce their annual revenues by billions of dollars.
