Marshall & Ilsley Corp. has agreed to make Metavante Technologies Inc.'s NYCE Payments Network LLC debit unit the Milwaukee company's exclusive network for most PIN debit transactions at the point of sale.
Such arrangements are becoming more common because debit networks, which historically offered only regional coverage, have expanded in recent years and now can give consumers payment capabilities at almost all merchants. The deals typically are designed to lower issuer costs and increase network volume.
Steve Rathgaber, the president and chief operating officer of NYCE, said that the deal announced Tuesday would increase M&I's debit revenue and "optimize the earnings of their card portfolio."
He would not say whether the deal would involve letting more interchange revenue flow through the merchant to the bank or other aspects of pricing. "More value flows to them by the time all the t's are crossed and the i's are dotted," he said.
Debit card use is growing briskly, especially at the point of sale. In 2006 the cards were used for 27% of all noncash payments, compared with 33% for checks, the Federal Reserve Board reported last month. In a similar report three years earlier, checks led debit 46% to 19%. (Credit cards held steady in both reports at 23%.)
Mr. Rathgaber said the growth of debit has changed the payment industry. "What used to be 'ATM networks' are now used primarily for point of sale transactions," by a margin of 3 to 1 or more.
The NYCE network is accessible from 99% or more of payment terminals, he said. "We work very closely with the point-of-sale processing community to assure that we have essentially ubiquitous coverage."
In addition, NYCE will be the primary network for M&I's automated teller machines. M&I has branches Arizona, Florida, Illinois, Kansas, Minnesota, Missouri, Nevada, and Wisconsin. It has 966,000 debit cards in force and 485 ATMs.
"Most organizations will continue to see a need for participation in one of the international networks," so customers can use their debit cards when they travel abroad, Mr. Rathgaber said. "That's what keeps the ATM relationship from being exclusive."
Patty Hayward, a senior analyst of debit advisory services at the Waltham, Mass., research firm Mercator Advisory Group Inc., said that debit networks are eager to build their volume as card transactions challenge checks for payments at the point of sale.
The growth of debit gives the networks an incentive to tie banks into exclusive processing relationships, she said. "What they're doing is offering them really good deals. In the long run, I think we're going to see increased competition in this area, at least among the big players."
In one case, the NYCE deal will not be exclusive. M&I Bank's branches in the Minneapolis-St. Paul area will continue to participate in a surcharge-free ATM arrangement that uses both NYCE and another debit network.
M&I has used NYCE as one of its debit providers since 2005, a year after Metavante acquired the debit network from First Data Corp. and four large banking companies that held a minority share.
Metavante spun off from M&I in November.
John Roberts, a senior vice president at M&I, said in a Metavante press release that the exclusive arrangement would benefit his company.
"We appreciate how highly NYCE is aligned with and supportive of our strategies for electronic payments' growth, and with our desire to provide our customers with ever-increasing convenience and a wide range of high-quality products," Mr. Roberts said.
