The Supreme Court's recent decision on the Wal-Mart lawsuit has cleared the way for a landmark case that will determine whether merchants must honor the commitment they make to Visa and consumers - to honor all Visa cards - when they put the Visa flag in their windows.
Visa believes that if a consumer chooses to use Visa instead of the other forms of payment accepted by a particular merchant, the consumer, not the merchant, gets to decide which Visa card to use.
The Visa payment system balances the interests of member financial institutions, merchants, and consumers. More than 22,000 banks, 24 million merchants, and hundreds of millions of consumers worldwide reap the benefits of Visa by having a payment card that is fast, secure, and truly global. At the heart of the Visa system is the Visa flag, the familiar blue, white, and gold symbol, which gives consumers a host of ways to pay and delivers enormous value to merchants.
This case strikes at the heart of the Visa system. Right now consumers know that their validly presented Visa cards will be accepted wherever they see the logo. They know that this promise of acceptance holds regardless of how they choose to pay their issuer - at the end of the day, at the end of the month, or over time.
In this litigation, merchants want to break this guarantee of acceptance. They want to pick and choose among the people who carry Visa cards, to say yes to some and no to others.
Visa believes that the merchants should have to keep their agreement to honor all Visa cards. Our "honor all cards" commitment enables Visa members to provide consumers with all kinds of payment options: Visa cards that are linked to lines of credit, Visa cards that contribute money to charities, Visa cards that provide airline miles, and, of course, Visa cards that are linked to checking accounts. With this lawsuit the merchants, led by Wal-Mart, want to eliminate this choice and limit consumers to one kind of Visa card.
The Visa check card gives consumers access to the money in their checking accounts at any merchant that accepts Visa anywhere in the world. It is safer and much more convenient for consumers than cash or checks. There are no finance charges. It comes with all of the consumer protections that Visa provides, such as zero-liability fraud protection and purchase dispute resolution options. Now there are even some issuers that offer check cards with rewards like airline miles.
Many consumers prefer the Visa check card because it is a helpful tool in budgeting for expenses, and they feel that if they know the money is being extracted directly from their checking account, they will be more careful in how they spend.
The merchants claim that they are entitled to billions upon billions of dollars in damages on sales that they would not have made or that might have cost them more if Visa check cards did not exist. But though some forms of payment may be cheaper for a few merchants, most cost almost all merchants more.
Merchants pay less to accept Visa check cards than they do to accept almost all card products offered by MasterCard and American Express, and for most merchants, it costs more to process checks than it costs to accept Visa check cards.
Even the merchants leading the lawsuit agree that they are better off with Visa products, including the Visa check card, than without them. They just don't want to pay for the benefits that Visa products, including the Visa check card, deliver.
The great irony in this case is that competition in the payments industry has never been more fierce.
Just look at the successes of the supposed "victims of suppressed competition" resulting from Visa's "honor all cards" commitment - the online ATM and debit networks. Star (owned by Concord EFS), NYCE (owned in part by First Data), and Pulse have succeeded beyond their wildest expectations. In fact, PIN-based debit alternatives have grown faster in recent years than the Visa check card.
Though the Visa check card has succeeded, too, its success has not come at their expense. These PIN-based debit systems did not even exist when Visa introduced the check card nearly 30 years ago.
As even the executives of these networks have reluctantly conceded, PIN-based debit systems have benefited from the success of the Visa check card and the commitment that Visa has made to introducing debit to consumers.
