JCB Co. Ltd., which operates Japan's largest card network, is negotiating with some U.S. banks to issue cards under its brand, the company's top U.S. executive said.
An arrangement announced last month with Morgan Stanley's Discover Financial Services LLC, in which Discover cards will be accepted on JCB's network, and vice versa, "provides a stronger foundation" for the Tokyo company to introduce its brand here, said Thomas M. Wright, an executive vice president and the general manager of its international unit.
"With Discover, we're going to increase acceptance, and we're finally at a position that we feel comfortable to have these kind of conversations," said Mr. Wright, who is based in Los Angeles.
Observers said that if JCB, a for-profit corporation owned by Japanese banks and other financial institutions, lands a U.S. bank issuer, it would be breaking new ground in the industry.
Gwenn Bezard, a research director at Aite Group LLC in Boston, said he could not think of an American bank issuing a card with a foreign brand.
Mr. Wright has been with JCB for five years. Before that he had been a West Coast executive for MasterCard Inc. for nine years.
Targeting the niche market for Americans who travel to Asia is "one of the possibilities" JCB is considering, he said. "We recognize that the U.S. card market is very saturated, and we are looking at different niche segments."
Mr. Bezard said U.S. travelers would be a good niche for JCB to pursue.
"For instance, if you're a businessman who travels to Japan often, it would be convenient to have a JCB card, because Visa and MasterCard are not well-accepted in Japan," he said.
Also, it would be easier to find an automated teller machine in Japan on the JCB network than one operating on MasterCard or Visa U.S.A. Inc. networks, Mr. Bezard said. (Under the acceptance deal, Discover cards will be compatible with JCB machines by 2008.)
Mr. Wright would not name the banks that are in "early discussions" with his company. He also would not speculate when the negotiations will result in an issuing deal.
However, Tim Sloane, a researcher at Mercator Advisory Group Inc. of Waltham, Mass., said that the market for traveling businessmen would be too small, and that JCB needs its cards to be used in the United States to make an issuing deal there profitable.
To gain merchants' acceptance, he said, JCB would have to reconcile their desire for lower interchange rates with issuers' desire to collect more fees for issuing the card.
"JCB would be in the same position as Discover, because it has to get its brand accepted by banks, consumers, and merchants," Mr. Sloane said.
Lately JCB has been venturing outside its home country more aggressively. Last year it signed deals with Bank of China, Bank of Shanghai, Taishin International Bank in Taiwan, and CreditMax BCS in Bahrain to issue cards under its brand.
JCB says on its Web site that China is one of the largest potential credit card markets, especially with Beijing scheduled to host the Summer Olympics in 2008 and Shanghai scheduled to host the World Expo in 2010.
The company also issues cards in Korea and Singapore.
Mr. Bezard said JCB has become less "Japan-centric," because it recognizes that payment companies need to be global. Discover also realized that its best bet to compete with Visa and MasterCard would be partnering with foreign companies, he said. Discover struck a similar reciprocal-acceptance deal last year with China Union Pay, and it bought two U.K. companies this year.
JCB, which, like Discover and American Express Co., acts as an acquirer and issuer, also lets banks issue under its brand in Japan. It has 57.7 million cardholders, including 4.6 million outside Japan. About 13.8 million merchants, including about 8 million retailers outside Japan, accept its cards.
