Executives from Visa International and MasterCard International are outlining different strategies for the idiosyncratic Canadian market, where banks can use either one brand or the other - and only their credit cards, not debit.
Visa Canada is the country's dominant credit card network, with more than double the volume of MasterCard Canada. (Both are based in Toronto.) But the MasterCard unit's aggressive catch-up strategy may be working. Last year its dollar volume rose 14.7%, while the Visa unit's rose 9%, and MasterCard has achieved parity in its Canadian merchant acceptance network.
The companies' field for competition is restricted. In Canada, banks use only the Interac network for debit cards, and neither Visa nor MasterCard expects that to change. The exclusive arrangement with Interac, which operates as a bank consortium, shuts Visa and MasterCard out of over $80 billion of annual volume - raising the stakes for the credit card market.
Visa says Canada contributed last year 4% of its worldwide volume. But the market still grew by 10%, and card executives expect more growth.
The head of MasterCard's Canadian business, Kevin Stanton, who was hired in December, said it has more momentum than Visa. After losing some big issuers to mergers in the early 1990s MasterCard decided to pitch itself to new entrants in the highly consolidated Canadian card market, including retailers and U.S. issuers, he said.
"We expanded our thinking in terms of who qualified for new membership," Mr. Stanton said. "I want to build on that."
One goal is to talk to Visa issuers about switching sides. "We haven't done that in the past," Mr. Stanton said.
He said MasterCard touts its flexibility as an advantage. "Visa membership rules are very traditional," he said. "We have an advantage over Visa in terms of recruiting retailers."
But Rick Pyves, the senior vice president of marketing and public relations for Visa Canada, said none of its 25 or so members are likely to switch.
"Once an institution makes a brand choice, it is kind of hard to shift from one to the other," he said, so Visa is not focusing on poaching issuers from MasterCard.
Visa and MasterCard split the top 10 Canadian credit card issuers, according to The Nilson Report, an Oxnard, Calif., newsletter. Visa has the top three - Canadian Imperial Bank of Commerce, Royal Bank of Canada, Bank of Nova Scotia - plus Toronto Dominion Canada Trust and Desjardins Group of Montreal. MasterCard has MBNA Corp., Bank of Montreal, Citigroup Inc., Canadian Tire, and Capital One Financial Corp.
Last year MBNA of Wilmington, Del., moved to fourth place in Canadian card receivables, with $3.6 billion, a 28% jump, according to The Nilson Report. The start-up issuer Canadian Tire grew 44%, to $1.8 billion, and is now No. 9.
But over all, Visa issuers reported $89.1 billion in combined volume, more than twice MasterCard's $41.67 billion. With that gap, MasterCard seems unlikely to overtake Visa anytime soon.
Mr. Stanton called MasterCard's market position a "rich second place."
The two brands face some of the same problems. The debit network Interac tops both in volume - a troubling fact given that high-growth card categories like grocery stores and fast-food chains are dominated by debit.
And the brands have different takes on whether Canadian banks should switch to smart cards from the magnetic stripe standard.
Mr. Pyves said Visa issuers have decided to adopt the chip by 2008 or 2009, when all Visa cards in Canada will have one.
Mr. Stanton said MasterCard issuers have shown little interest in chip cards, but the company will accommodate those that want them. "The starting point is: 'What are the business opportunities for our customers?' he said. "We feel our customers know best."
