TEN YEARS AGO, Nordstrom Inc. was a major cause of grief to the bank credit card industry.
This year, it became a true friend.
The Seattle retailer announced in July that Nordstrom National Credit Bank, the issuer of its private-label credit cards, had been accepted for membership in Visa U.S.A. The bank plans to start marketing Visa cards next year.
Nordstrom hailed Visa as the card brand and payment system that best suited its desires to serve customers and generate sales. Visa officials proclaimed a symbolic if not substantive break in the longstanding hostility between general-merchandise retailers and the bank card community.
There is debate on both points.
Some retailing experts wonder whether Nordstrom's card-issuing strategy will be worth its costs. And while virtually all big stores -- even perennial holdout Sears -- have come around to accepting bank cards, many still carp about banks' processing fees and doubt that many retailers will want to become direct issuers like Nordstrom.
But Nordstrom's joining Visa was a clear turn in banker-retailer relations and put to rest one of the more raucous controversies dividing the two camps.
In 1983, Nordstrom sued Visa, alleging price-fixing. Many embittered retailers had contemplated such an action. They felt Visa -- and its rival, MasterCard -- illegally set the interchange rates that influence the fees merchants pay their card-processing banks.
Nordstrom was not just echoing the standard complaint. The $3.4 billion retailer specifically objected to bank fees for handling Visa debit cards, which Seattle-First National Bank had begun issuing in large numbers.
Visa's interchange rates were no different for credit and debit transactions. Nordstrom saw that as evidence that the price, at least for debit, was arbitrary.
As Visa added tiers and options to its price schedule, Nordstrom dropped the suit. By the time it announced its Visa membership this year, the two organizations seemed to have buried their differences.
"The evolution of the [card] industry caused us to change," said John Walgamott, president of Nordstrom National Credit Bank.
An 18-year veteran of Nordstrom, who spent all of that time in the credit area, Mr. Walgamott said of Visa, "They have a good franchise now. The pricing is much more attractive."
Embracing Visa's view of the world, he added, "I learned at the time of the lawsuit that Visa and MasterCard are not just credit cards. They are payment systems," and Nordstrom decided it had to be a part of them.
Mr. Walgamott also evaluated MasterCard and found it "not far behind" Visa.
Visa, too, took a fresh look and found no reason to exclude Nordstrom from the growing trend toward cobranding, in which nonbanks piggyback on the Visa name. Nordstrom could have contracted with a bank to issue its Visa cards but opted to use the private-label Nordstrom bank it had opened in 1991 in Englewood, Colo.
"We are pleased that an esteemed organization such as Nordstrom has decided to exclusively issue Visa cards," said H. Robert Heller, until recently the president of Visa U.S.A. He had taken a close interest in the negotiations with Nordstrom.
"This is a breakthrough in that it combines two superb brands," Mr. Heller said. "They have a quality image, and there is a lot of synergy between us."
At Visa only since 1989, Mr. Heller had missed out on the earlier conflicts, and he regards them as water under the bridge.
"There was a time when one pricing scheme fit all, when one interchange rate applied to everyone and every type of transaction," he said. "We became more sophisticated, with various types of cards and transactions, and they are differentiated from a technical standpoint. This makes big retail stores happier."
"Visa's fee structure, support system, and market share decided it for us," Mr. Walgamott said. "We wanted to keep it simple and saw Visa as the best fit."
From a marketing standpoint, Nordstrom has come to grips with the fact that many consumers prefer bank credit cards to store brands. Going well beyond its policy of accepting American Express, MasterCard, and Visa, Nordstrom wants a piece of the action as a Visa-issuing bank.
Mr. Walgamott, who in keeping with Nordstrom's team-management style is reluctant to take credit for its Visa strategy, said consumer research shows parallel trends in card preferences.
"Bank card usage is increasing," he said. But Nordstrom customers "also tell us they would prefer, if given more options, to use a Nordstrom credit card. Once Nordstrom issues its own Visa card, we will be able to satisfy both of those specific customer needs."
Mr. Walgamott runs a bank with 270 employees. Annual credit volume from the 72 Nordstrom stores in 11 states runs about $1.6 billion; the bank has about $700 million in receivables.
Nordstrom is evaluating how it will charge for the Visa card. Mr. Walgamott said pricing will be "competitive" and Nordstrom will take pains to deliver the same high level of service that store shoppers have come to expect.
Mr. Walgamott is also considering serving as his own "merchant bank," or conduit into the Visa network. But he admitted it may be cheaper to rely on a large-scale transaction-processing company.
"Our decisions will be financial," Mr. Walgamott said. "We hope to be profitable and create additional volume -- just as Visa wants more transactions for its franchise."
It remains to be seen whether Nordstrom stands alone in its industry as a bank card issuer, or inspires a pack of imitators. Both Visa and MasterCard are seeking more breakthroughs.
"Right now, the conversations are very cordial" between bankers and retailers, said Mr. Heller. "You will see more cobranding deals."
Himself a Nordstrom shopper and believer in its high-touch approach to customers, Mr. Heller added, "I have known John Nordstrom for many years. We've always gotten along well."
