The Japanese credit card company JCB Co. Ltd. said a deal it announced this week and one it landed last summer will prove pivotal to its ongoing U.S. expansion efforts.
The five-year contract announced Tuesday with ACI Worldwide Inc. of Omaha, which offers the network switch that routes authorization transactions from the United States and other international markets to Japan, extended a relationship that has lasted the past decade.
JCB said the agreement will enhance a multipronged U.S. expansion strategy that includes a reciprocal acceptance deal it signed in August 2006 with Discover Financial Services LLC. That deal allows the Tokyo company's cardholders to shop at U.S. merchants that accept Discover, and allows Discover cardholders to use their cards at JCB merchants in Japan.
Thomas M. Wright, the president and general manager of JCB U.S.A. in Los Angeles, said in an interview that the ACI contract will complement the Discover relationship by giving JCB the "scalability to ensure that we can accommodate the increased transaction volume that we anticipate in the near future."
JCB and Discover have linked their systems and are preparing to test the use of JCB cards here. They expect Discover cards to be accepted at Japanese merchants that take JCB cards, starting next year.
Mr. Wright called the United States the "No. 1 travel destination for Japanese travelers and for JCB card members." JCB cards are issued only in Asia, the vast majority in Japan.
JCB has been talking with U.S. issuers since late last year about offering its cards. Mr. Wright said those discussions have progressed incrementally, though no U.S. financial institutions have agreed to issue a JCB card.
The relationships with Discover and ACI Worldwide should advance the Tokyo company's efforts to gain a foothold with U.S. issuers.
"We're setting the table nicely to be able to talk to issuers in the future," Mr. Wright said. "Acceptance of the JCB card" at merchant locations "won't be an obstacle for us."
JCB cards are accepted at about 800,000 merchant locations in the United States (excluding the Discover merchants). Though this is a significant number, it pales next to the millions of merchant sites that accept Visa and MasterCard.
"Discover is going to help us get" wider acceptance, Mr. Wright said. That "gap," he said, has been the main "obstacle for us in the past to have serious discussions with potential issuers."
Mr. Wright said JCB sees itself as appealing to banks with a high proportion of Asian customers, especially expatriates that now live in the United States.
"That's a natural progression for us to be pursuing initially," he said. "However, we also think, if positioned properly, there could be a product out there that would be attractive for the general U.S. consumer, not necessarily Asian-based."
Ken Paterson, director of the credit advisory service for Mercator Advisory Group in Waltham, Mass., said that though JCB has proven itself in Asian markets and has some brand recognition in the United States with people who travel frequently to Asia, "the JCB brand doesn't have high awareness amongst the broad U.S. cardholder population."
"To succeed in the United States," Mr. Paterson said, "JCB would have to bring something unique to the market, some product characteristic or rewards program that sets them apart as they establish their brand in the U.S.
"They're an important player in the Asian market. I wouldn't count them out, but it certainly will be challenging" for JCB to become a major player in the U.S. credit card market.
Paul A. Tomasofsky, the president of Two Sparrows Consulting LLC in Montvale, N.J., said JCB is fighting an uphill battle against entrenched companies in Visa U.S.A., MasterCard Inc., American Express Co., and even its partner, Discover, which plans to spin off from Morgan Stanley in a couple of weeks.
Most consumers already have multiple cards, and JCB would struggle to become more than a specialized provider, Mr. Tomasofsky said.
"What would be their sustainable competitive advantage if they went beyond their niche here in the U.S.?" he said. "It would be very difficult for them without spending a whole lot of money or giving up a whole lot of revenue and margins to be able to penetrate the existing card base."
"I think it's a tall order for them to go beyond their traditional niche," he said. It would require some unique product or offer, and "quite frankly I can't think of what that would be."
