Visa to Buy Point-of-Sale Network In California and Take It National

Visa U.S.A. has agreed to buy Interlink, a large point-of-sale network in the West, and plans to make it available to retailers and consumers nationwide.

The card association intends to turn Interlink into the first national POS system allowing merchants to receive debit card payments instantly. Visa's member banks will be able to market the network to supermarkets, gasoline stations, fastfood restaurants, and other high-volume merchants.

Visa, which was expected to announce the acquisition agreement late Tuesday, declined to disclose the purchase price. But industry sources said the cost could exceed $100 million, based on estimates of the network's potential performance.

San Francisco-based Interlink is owned by units of BankAmerica Corp., First Interstate Bancorp, Security Pacific Corp., and Wells Fargo & Co.

The acquisition is slated for completion in the fall, and some banks may begin marketing Interlink outside the West by year-end, Visa executives said. Participating financial institutions will put the Interlink logo on the back of their customers' automated teller machine cards.

Interlink is already the largest bank-owned, regional POS network and is growing rapidly. Last year, its 12 million cardholders used their Interlink cards 6 million times a month at 3,500 retailers.

Monthly Volume Skyrockets

So far this year, monthly volume has soared to 7.5 million transactions. More than 4,000 supermarkets, gas stations, movie theaters, fast-food restaurants, and other merchants in California, Arizona, Nevada, Oregon, and Washington accept the Interlink card.

Under Visa's ownership, the network's reach could increase substantially. Interlink would be poised to become an alternative to the two national debit card services already offered by Visa and MasterCard - Visa Debit and MasterDebit.

"We want to serve the supermarket and petroleum industries, who will not take and pay for the Visa Debit card," said wesley Tallman, an executive vice president for Visa in San Mateo, Calif.

In Visa Debit and MasterDebit, purchases are Processed through the country's credit card networks. As a result, the transfer of funds is delayed - a feature that makes the systems unattractive to high-volume, low-margin, cash-heavy retailers like supermarkets.

A Fee Differential

Furthermore, merchants must accept standard to MasterCard and participate Visa credit cards to in those systems. They also pay the same fees for debit transactions as for credit transactions. These fees are a small percentage of each card sale.

But Interlink, like other regional point-of-sale networks owned by banks, allows retailers' accounts to be credited at the time of purchase. Participating merchants pay a flat fee, which is generally less than credit card fees.

Speed, guaranteed payment, and low cost are believed to make Interlink and similar direct-debit systems more attractive than Visa Debit and MasterDebit to high-volume retailers.

Industry observers had speculated that Visa would buy Interlink - which has been under its management for the past six years - since the demise last year of Entree, masterCard's and Visa's joint debit card venture. After scrapping Entree to settle an antitrust complaint, Visa and MasterCard each began developing its own direct-debit system.

MasterCard Has Plans

MasterCard International expects to announce its own direct-debit program before year-end, said Edward Hogan, senior strategist for the New York-based card association. Tentatively called Maestro, the system would place an international POS mark next to those of existing local, regional, and national networks.

"We believe that the regional marks have value that should be enhanced, not replaced," Mr. Hogan said.

In the next several months, Visa will work with the country's regional electronic funds transfer networks to help them participate in Interlink, Mr. Tallman said. But whether the regionals will want such a link is unknown.

Some of the country's largest shared systems, including the New York Cash Exchange, Most, Star, Cash Station, and Southeast Switch, are working to create their own national POS offering.

Issues Unresolved at NYCE

Alan Pohlman, president of New York Switch Corp., the Hackensack, N.Y., company that administers the NYCE network, said many pricing and other issues must be worked out before the group can roll out a national program.

"I'm not sure what Visa will do with Interlink," Mr. Pohlman said. "Will it be a service mark, a central switch, or will they franchise it? The impact can only be determined after a proposal is made to us."

At Visa, Interlink will be secondary to Visa Debit, which already claims 7 million U.S. cardholders, Mr. Tallman added.

"Visa Debit is an attractive product for banks to offer," he said. "We are convinced that it can survive as our premier debit product." The card association will announce several new Visa Debit issuers in the next 12 months, he said.

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