Visa and MasterCard Launch Debit Battle

ORLANDO, Fla. -- The battle for the U.S. electronic debit card market started in earnest on Monday as Visa and MasterCard announced the first participants in their competing systems.

Visa U.S.A. said 11 financial institutions have committed to join Interlink, a point-of-sale transaction system that Visa acquired in October from major California banks.

Also, four regional electronic banking networks agreed to provide connections between their members and Visa's debit network.

Regional Networks Sign Up

In a return salivo, MasterCard International said nine regional networks have signed letters of intent to participate in its entry, Maestro.

The announcements, made at a retail banking conference, show how electronic debiting -- in which cardholders pay for goods and services through immediate debits of their checking accounts -- is emerging as the latest battleground for MasterCard and Visa.

As the credit card market matures, the rival associations are pushing member banks to print the Maestro or Interlink logo on the back of automated teller machine cards. Those logos turn the cards into what are essentially electronic checks.

Previous Entry Scrapped

The bank card associations are playing for high stakes after their previous debit card venture, a joint system known as Entree, was scrapped to stave off an antitrust lawsuit by several states.

To keep enforcers at bay, financial institutions will be allowed to market only one direct debit option to their customers. They will not be able to engage in "duality" as they do with credit cards, marketing both the MasterCard and Visa brands.

An executive of each group took the stage at the Bank Administration Institute's retail delivery systems conference to tout its debit offering and discredit the competition's.

For Visa, senior vice president Peter Gustafson noted that Interlink, which was organized by five California banks in 1983, is already viable, with 12 million cardholders able to make purchases from 3,500 retailers.

Visa bought the West Coast network with the intent of taking it national.

According to Mr. Gustafson, the 11 financial institutions that have committed themselves to Interlink will expand the network into nine more states.

Visa declined to disclose the names of the initial bank participants. "These institutions do not want to give their competition the chance to know what they are doing," Mr. Gustafson said in an interview.

The banks will begin to issue cards in about six months, he said.

The 11 banks as well as GulfNet and BankMate -- automated teller machine networks based in the South and Midwest, respectively -- will become full members of Interlink, with voting privileges and eligibility for a seat on the network's board.

Two other regional networks -- Internet in the Middle Atlantic region and Cash Station in Illinois -- said they will participate in Interlink.

When Visa's Interlink purchase was announced in June, many observers believed the system would exclude the regional networks. On Monday, Mr. Gustafson said regional networks have many options, ranging from full membership in Interlink to mere marketing agents or administrators for member banks.

MasterCard's nine network participants include Cash Station, GulfNet, and Internet. In addition, the association has lined up Pulse in the Southwest, Yankee24 in New England, Exchange/Accel in the Northwest, Star/Explore in the West, Tyme in the Midwest, and the Southeast Switch.

MasterCard formed Maestro as an alliance with many of these networks. The involvement with Maestro does not prohibit the networks from participating in Interlink.

By working closely with the regionals, MasterCard executives say, Maestro can take advantage of those networks' existing direct debit networks.

Arthur D. Kranzley, a MasterCard senior vice president, added that Maestro enjoys brand awareness that Interlink does not: 75% of consumers recognize Maestro's red and blue interlocking circles as an offshoot of MasterCard.

Another advantage, he said, is that Maestro will go global and that Interlink will not. But Mr. Gustafson said there is nothing to prevent Interlink from evolving internationally.

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