After another year in which legislators and regulators rewrote the rules of the game in the payments industry, equity markets have rendered provisional judgments on which companies face the worst handicaps.

While merchants and payments companies form the main axis in the interchange contest, the playing field is multidimensional. Interchange fees on card purchases flow to issuers, and analysts and investors have tendered views on how the Federal Reserve's proposed 12-cent cap for debit transactions will wash back against acquirers (which could reap a windfall by not passing rate reductions on to merchants), prepaid firms (which may gain a relative advantage since their products are exempt under the proposal) and others.

Among the four network companies, the shares of Visa Inc., which has the largest debit footprint by far, appear to have absorbed the most damage (see chart below).

For much of 2010 — through the Senate's approval of the Durbin amendment on interchange oversight in May and its enactment as a part of the Dodd-Frank Act in July — Visa's stock traded in near-lockstep with MasterCard Inc.'s. But in September Visa began to underperform against its chief rival.

To be sure, movement in share prices cannot reasonably be ascribed to a single factor, and analysts have identified potential crosscurrents from interchange regulation.

In a note issued in December, analysts with Goldman Sachs Group Inc. wrote that Visa, because of its large market share, could have the most to lose under rules that would end arrangements tying a card portfolio to a single debit network. Or the rules might simply induce "market share swapping" with MasterCard, since transactions volume would gravitate to the network with the lowest processing costs, "which given its size and scale is likely" Visa, the Goldman analysts wrote.

Shares of Discover Financial Services, which have been buoyed by rapid improvements in the credit performance of the company's loan portfolio, have performed the best during the period charted here. In a December note, analysts with FBR Capital Markets reckoned that the Durbin amendment could have a slightly positive to a slightly negative impact on Discover's earnings. The company could gain market share, but at revenue margins pushed lower by competition. Also, reductions in debit marketing by issuers and a pullback by consumers reacting to new fees and cuts in rewards and the like could shrink the overall pie.

American Express Co.'s stock appeared relatively resistant (but hardly immune) to flak from the Durbin amendment initially — the company has no debit business. But Amex was hit hard when the Department of Justice sued in October over agreements that restricted merchants from promoting competitors' cards, and it seems mounting concerns over price pressures have been increasingly weighing on its shares.

The Goldman analysts wrote that trading activity "suggests that debit interchange has already been priced" into the stocks of bank issuers, and fallout for the group appears to have peaked in July. That month, on the day Bank of America Corp. projected that the Durbin amendment would wipe out about 70% of its $3 billion in annual debit revenue, the KBW Bank Index dropped 5.7%.

On Dec. 16, the day the Fed proposed limits on debit interchange that would indeed amount to about a 70% reduction, the bank index managed to eke out a 0.2% gain while MasterCard fell 10.3% and Visa fell 12.7%.

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