MasterCard in Talks with Switch
LONDON - MasterCard is negotiating with Britain's Switch network on a deal that would allow Switch cardholders to make purchases with their debit cards in foreign countries.
An agreement would represent a coup for MasterCard, which is charting plans with affiliate Eurocard International to take on Visa in the global debit arena.
A New Debit Marque
A MasterCard spokesman in New York confirmed that Switch has been discussing using Maestro, the MasterCard debit marque unveiled last month, for global acceptance.
"We believe these discussions are going well," the spokesman said. "However, we have nothing to announce at this time except to say that we believe Maestro would provide valuable global utility to debit cards bearing the Switch marque."
When a consumer makes a purchase with a debit card, the transaction amount is automatically deducted from his or her checking account. Debit card purchases at supermarkets, gas stations, and other retailers are increasingly popular in Europe, where 60 million debit cards are in circulation.
19 Million Cards Circulating
In Britain, Switch member banks have issued more than 19 million cards. Major participants include National Westminster, Midland Bank, and Royal Bank of Scotland.
But cardholders can now make purchases with their cards only at retailers in Britain. By aligning with MasterCard, Switch cardholders could make purchases at millions of retailers worldwide.
The pact would also help Switch compete with Visa International for debit card business in Britain. Visa uses the Delta marque for its British debit cards, whose main issuers are Lloyds Bank, Barclays Bank, and the TSB consumer banking group. Delta cards are already accepted at Visa merchants outside the United Kingdom.
A Switch representative said the committee studying the issue favors the Maestro system but declined to provide further information.
Issue of Security
Switch bills itself as a fully secure electronic system. Visa's Delta relies on a combination of electronics and paper vouchers - a system that may have more potential security problems, industry sources said.
A pact between Switch and MasterCard is considered unlikely before next year as banks study potential problems, including security and fraud risks.
In introducing its Maestro card, an executive of MasterCard/Eurocard said it is likely to be the "dominant product" in the plastic payments field in the 1990s.
Debit card transactions are quickly gaining on traditional credit card purchases in Europe. According to the Association for Payment Clearing Services, an industry group, annual debit card transactions in Britain could hit 4 billion by the year 2000, becoming the primary method of payment.