using in its battle with Visa for credit card cobranding programs. Saying its money will be better spent on marketing initiatives and other benefits to member banks, MasterCard announced it will discontinue at yearend the financial incentives it offered to banks that chose its brand in cooperation with nonbank partners. Visa U.S.A. had previously signaled its intention to discontinue similar incentives for cobranding programs launched after this year. MasterCard's initiative was scheduled to expire Dec. 31, and the association's U.S. board voted Nov. 15 not to renew it. MasterCard, which has long claimed the cobranding lead over Visa, introduced the enticements after its California-based rival struck first with an incentive package in April 1994. MasterCard said it was compelled to match Visa dollar for dollar, and the associations have since spent or sacrificed millions of dollars to be the cobranded card of choice. Each offered to waive service fees for issuers that converted cobranded cards from one brand to the other. But the bulk of the expenditures consisted of $1 per card in marketing support, up to $2 million per cobranding program, and up to $2 million more per program in support of their respective brands. Alan J. Heuer, president of MasterCard's U.S. region, based in Purchase, N.Y., said the group wants to move on after having sunk a significant amount of money into the incentives. "Those monies should be spent on building the brand and lowering the costs of services to our members, and not on making payoffs to individual programs for cobranded deals," Mr. Heuer said. All 10,000 member institutions will benefit from lower service charges and a stronger brand identity, he added, compared with only the hundred or so that pursued cobranding deals. William J. Moore, president and chief executive of SunTrust BankCard in Orlando, said he supported MasterCard's decision for that reason. "All members end up paying for that expense, while not all members can participate." Mr. Moore said Visa succeeded in raising the stakes for cobranding. "It spurred all our interest," he said, "but its effectiveness has run its course." K. Shelly Porges, chief executive of Porges/Hudson Marketing in San Francisco, said Visa sent a strong signal with its incentive package that, after having fallen behind, it intended to get into the cobranding game for keeps. Indeed, Visa won several significant deals in recent months, including the Blockbuster Entertainment program with NationsBank and Toys 'R Us with Bank of New York. "I'm not sure that MasterCard's matching made as much of a difference," Ms. Porges said. "Visa led the industry with the incentives," said James L. Accomando, a Fairfield, Conn., consultant. "They had to because they had a moratorium for a couple of years and MasterCard dominated the industry." Visa imposed its moratorium on cobranding because of concerns that its banks were losing control over the brand and making it too easy for nonbanks to have access to the credit card payments system. The ban was lifted in February 1993, but Mr. Accomando pointed out that in the meantime, "MasterCard had 100% exclusivity." It became the dominant or exclusive brand on the cards of AT&T, General Motors, General Electric, and other prominent co-marketers. MasterCard said it has closed 130 cobranding deals this year, most benefiting from the financial incentives. But with its recent signings, "Visa's back in the leadership position it had before the cobranding phase," Mr. Accomando said. "MasterCard probably has more cobranded relationships and cards, but that's because Visa wasn't around for a couple of years." "Today we are still far and away the leaders, and it is our absolute intent to stay the leaders in cobranding," Mr. Heuer said. "We are going to be redoubling our efforts. Our view is cobranding will continue to be a major force in the marketplace." In a statement issued Monday, Visa declined to comment specifically about MasterCard's move. But it left open the possibility that it will revisit pricing issues. "Visa U.S.A. continually modifies its strategies to reflect changes in the competitive landscape and ... seeks opportunities to enhance our brand and add value to all members," the statement said. "Therefore, we are going to continue to evaluate each opportunity on a case-by-case basis. Our board of directors continues to evaluate strategies. However, we have no announcements to make at this time." Some observers said Visa might consider reinstituting incentives in the hope of delivering a knockout punch to MasterCard. "That would give them a leg up," Ms. Porges said. "It would almost feel as if MasterCard (would be) ceding the advantage to Visa."

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