Visa U.S.A. announced jubilantly on July 21 that Nordstrom Inc., a retailer with which it had cool relations in the past, would become an issuer of Visa credit cards.

Visa saw Nordstrom's desire to join Visa as a validation of the card brand and an easing of historical tensions between the bank card and retailing industries.

But others were not so quick to celebrate a detente. Retailers still battle bankers over pricing and other policies. The two camps still view each other as competitors for consumer credit and disposable income.

Most observers of the banker-retailer wars are reluctant to call the Visa-Nordstrom deal a watershed event in itself But it, may mark a new turn in a fight that, all things considered, seems to be going the bankers' way.

Sears Comes Around

After years of resisting, in which they preferred to promote customer loyalty through proprietary store cards, virtually all general-merchandise retailers have come around to accepting MasterCard and Visa cards.

The trend culminated in early August when Sears, Roebuck and Co. finally broke its taboo against cards not invented there.

Sears concluded, as did most of its competitors, that offering more payment options "results in new customers shopping our stores, and incremental sales," said Sears Merchandise Group chairman Arthur C. Martinez.

Some retailing analysts question the "incremental sales" assumption, but most agree that when consumers signal their preference for MasterCard or Visa, it must be served.

Hostility Seen as Cooling

Retailer-banker controversies have "always been a matter of pricing," said Theodore W. Volckhausen, editor of Funds Transfer Report, a Westport, Conn., newsletter that covers consumer credit markets. With Sears filling out the bank-card bandwagon, "there doesn't seem to be the furor that there used to be."

Ralph Spurgin, president of Limited Inc.'s credit division, still has some of the old-time furor. Even though his group has bent to shoppers' wishes and takes MasterCard and Visa, he hurls price-fixing charges at the bank card associations.

He says they secretly and improperly set the interchange rates that influence the fees merchants pay to process credit and debit transactions.

Standing Firm

"We have no plan to issue a Visa or MasterCard," Mr. Spurgin said. Not that he is totally doctrinaire - in a previous stint at J.C. Penney Co., he launched the bank card program for J.C. Penney National Bank

"That was not a defensive move," he said - an apparently pointed commentary on Nordstrom's strategy.

The prestigious Seattle-based retailer, which has 72 stores and $3.4 billion in annual sales, filed an antitrust lawsuit against Visa in 1983, alleging illegal price-fixing. Nordstrom specifically protested the fact that card-processing fees for newly introduced debit cards were the same as for credit cards, even though the former were analogous to the cash or checks that it handled at par value.

Fence Mending

Nordstrom dropped the suit as Visa became more flexible in the way it processed and charged for electronic payments.

Over 10 years, Visa's efforts to mend fences with retailers had a clear impact on Nordstrom. Its plan to begin issuing Visa cards next year takes the banker-retailer relationship to a new level.

Times have changed, and Nordstrom has come to view Visa as a payment system it needs to be connected to, said John Walgamott, president of Nordstrom National Credit Bank in Englewood, Colo. "Visa has a strong franchise, and its pricing is much more attractive. We saw Visa as the best fit."

Market research showed that by offering Visa, Nordstrom could satisfy customers who increasingly prefer bank cards as well as those loyal to the Nordstrom card, Mr. Walgamott said.

Big Merchants' Options

Because Nordstrom, like Limited Inc. and other big merchandisers, has a banking subsidiary, it can issue its own cards. It is also weighing whether to process its own transactions, rather than going to a bank or merchant-processing specialist.

"There is still a tendency retailers to control their destiny and not turn the receivables over to a third party," Mr. Walgamott said. "All our decisions are financial - we hope to be profitable and create additional volume - just as Visa wants more transactions for its franchise."



Visa U.S.A.

San Mateo, Calif.

Nordstrom had long been a valued merchant in the Visa business. We had good relations.

Now they have the basis for a partnership - the companies are on compatible tracks. Visa couldn't have been more pleased.

Nordstrom once had a problem with debit pricing. That was at a time when one pricing scheme fit all. One interchange rate applied to everyone, on every type of transaction.

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 is pricing to the market.


President, credit services

Limited Inc.

Columbus, Ohio

Only one issue is really behind us: whether we should take bank cards. Most retailers have come to accept that a sufficient number of customers want to use bank cards.

Pricing is still very much an issue, on the credit side and especially on the debit side. Off-line debit card pricing is still very unfair, and possibly in violation of antitrust law when credit and debit acceptance are forcibly tied together.

All the components that go into the prices we pay are not publicly available. I suspect that we are helping to pay for advertising and promotion, so we are paving for the transferring of business among players.


Senior vice president

First National Bank of Omaha

It would be inaccurate to say there has been a change in the banking-retailing relationship. When it comes to processing merchant transactions, most of that business goes to nonbanks.

The decisions retailers are making are more a response to consumers. Their acceptance of bank cards comes more out of the retailer-consumer relationship than the retailer-bank relationship. And when consumers make the choice to use a bank card, it may be for reasons other than credit, such as convenience.

Look at how many retailers accepted the Discover card, even though it was the product of a competitor [Sears, Roebuck and Co.]. It was because the consumer wanted to use it.



First Annapolis (Md.) Consulting

Nordstrom is seen as an influential retailer, and maybe their decision to issue Visa cards will lead others to do the same. But what they are really doing is responding to consumers and recognizing the value of the Visa franchise.

If there has been a thaw between bankers and retailers, the consumer has been the driving force. For a retailer, the financial justification of taking bank cards may not be totally there, but it's easier from the consumer's standpoint.

With the changes in issuers' product lines, cardholders now have the choice between a "borrower's card" at prime plus 2.9, or a "transaction card" like General Motors' with rebate points.

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