NEW ORLEANS - Executives of Visa and MasterCard did their best to steer talk at this year's Card Forum & Expo to any topic but the recent settlement of the Wal-Mart suit.
The 700-plus attendees were having none of it.
Talk of rewards programs for debit cards and contactless payment cards drew shrugs from the issuer executives. Instead, throughout the conference, presentations and conversations over meals and in hallways invariably wound back to the issue of dealing with lost revenue, whether by annual fees or restructuring debit loyalty programs - two ideas that a Citigroup Inc. executive said are on the table there.
Tuesday's formal session on the lawsuit drew such heavy interest that some attendees could find nowhere to stand. One speaker, David Balto, a partner with the Washington law firm White & Case LLP, cajoled issuers to come forward and sit on the floor at the front of the room, "just like in college."
No one took him up on the offer, but the discussion was a highlight of the conference (which was sponsored by Thomson Media, American Banker's parent company).
The other speaker on the panel, David R. Schneider, executive vice president and general counsel of Pulse EFT Association of Houston, who frequently comments on the suit, criticized the card associations' handling of it.
"There is now a coalition of merchants that were educated - at Visa and MasterCard's expense - on the value of being aggressive, and … that lesson has not been lost on them," Mr. Schneider said. "We will see more of the merchants asserting themselves."
He also suggested that the demise of the so-called "honor all cards" rule, which Visa and MasterCard were forced to drop in the settlement, might not cause as many problems as feared. "The 'honor all cards' rule never struck me as being worth defending at all costs," he said.
Mr. Schneider also criticized the lengths to which Visa and MasterCard are going to fight aspects of the ruling in the Justice Department's lawsuit against them. The associations are appealing the decision, which, if put into effect, would permit members of Visa and MasterCard to issue other card brands.
"In the end, my question would be, 'Is it worth the expense to defend the exclusionary rules that prevents issuers from affiliating with American Express and Discover?' " Mr. Schneider asked. "I doubt it."
Someone in the audience asked where the $3 billion that Visa and MasterCard had agreed to pay in the Wal-Mart settlements - $2 billion for Visa and $1 billion for MasterCard - would come from. Mr. Schneider said it was still unclear.
"Visa and MasterCard said they will fund it out of ongoing revenues," but which issuers would have to pay what has not been specified, he said. "I suspect the fight will be behind closed doors, but assessments will not be viewed favorably."
He raised the subject of a motion filed by TCF Financial Corp. of Wayzata, Minn., that challenged the Wal-Mart settlement. TCF says Visa and MasterCard put the interests of credit card issuers before those of their debit card issuers.
The judge will probably grant TCF a role as an intervenor, Mr. Schneider said, but "I think the settlement will get approved," and Visa and TCF "will have to settle between themselves."
Visa and MasterCard executives stuck closely to the party lines about the settlement. They steered discussions toward the topics they were trying to promote - such as expanded rewards programs.
Visa is planning a national advertising push early next year for Visa Extras, which offers issuers a ready-made, all-purpose loyalty program for debit and credit card holders. People who do not want frequent-flier points or credit toward hotel stays might be attracted, Visa said.
A MasterCard executive said his organization is developing a similar program.
Visa's executive vice president for product development and management, Elizabeth Buse, said in a presentation Tuesday that only 20% of credit and debit cards are affiliated with loyalty programs, but consumers are eager to get rewards for their spending.
"One of the primary needs in our industry is to extend rewards and loyalty programs" to more cardholders, she said. "Perhaps the area of greatest need is among debit card holders, who over the past decade have fallen in love with their debit cards and are using them more and more instead of cash and checks."
Ms. Buse told the audience that a Visa survey found that 81% of cardholders under age 35 expect some kind of reward for using their debit card, and that Visa Extras was designed to meet that expectation. Visa had originally aimed to start pushing the program this year.
MasterCard and American Express Co. executives talked up contactless payment cards, which use radio waves. One such card is ExxonMobil's SpeedPass; another is MasterCard's PayPass, which Citigroup Inc., MBNA Corp., and J.P. Morgan Chase & Co. are testing in Orlando.
The executives said the technology appeals to merchants because it speeds up the settlement of transactions and seems to prompt consumers to spend more than they would with cash.
After hearing MasterCard's pitch, a Florida community bank executive who spoke on condition of anonymity said a new rewards program was not on her priority list.
What is, she said, is replacing the $500,000 of debit interchange her bank expects the Wal-Mart settlements to cost it.
A Citibank executive also talked down debit-related loyalty programs, saying the bank is rethinking them in light of the settlements. Citi, which offers its American Airlines AAdvantage program on both debit and credit cards, has been touting the debit card aspect, which requires cardholders to close purchases with a signature in order to earn the points.
Wayne Malone, a vice president for distribution management at Citibank North America, said it is looking for ways to replace the revenue it expects to lose later this year. Among the steps being considered are raising its annual fee and paying airlines for air miles when they are redeemed, rather than when they are earned, as is the case today.
Interchange "pays for a lot of these programs," Mr. Malone said. "Unless we come up with a viable loyalty program" they will fall apart.
