By acquiring Washington Mutual Inc.'s banking arm, JPMorgan Chase & Co. may be strengthening its already considerable bargaining power with the payment card networks.
The New York company has long maintained relationships with both Visa Inc. and MasterCard Inc., though it has tilted more toward Visa since the 2004 acquisition of Bank One Corp.
Last week's $1.9 billion purchase of Wamu's banking operations, including its card portfolios, gives JPMorgan Chase a new opportunity to entertain offers from both networks, some observers said.
Wamu, which issued mostly Visa credit cards, became MasterCard's top debit issuer after the Purchase, N.Y., network won its business in 2005. JPMorgan Chase currently issues mostly Visa debit cards but is the No. 2 credit card issuer for both networks, according to The Nilson Report.
Last week JPMorgan Chase said it was too early to predict what branding decisions would be made regarding Wamu's card portfolio.
"We haven't decided what we're going to do with brands yet," James Dimon, JPMorgan Chase's chairman and chief executive, said in response to an analyst question on a conference call Thursday night to discuss the Wamu acquisition.
Paul Hartwick, a JPMorgan Chase spokesman, said Friday, "We still believe that you can have strong relationships with both associations." He would not discuss the details of Wamu's contracts with the networks.
Tien-tsin Huang, an analyst at JPMorgan Chase's securities unit who follows Visa and MasterCard, wrote in a note to clients Friday, "We believe the Wamu debit contract with MasterCard runs through 2010."
Mike Stephens, the managing director for the card advisory firm Advantage Consulting Group Inc., said contracts between issuers and networks "are very thorough usually in addressing these types of occurrences" and often contain change-of-control clauses.
Arthur E. Clark Jr., the managing director of the Nyack, N.Y., payment firm Business Insights Consulting Inc., said JPMorgan Chase usually has "similar clout" to its top competitors, Bank of America Corp. and Citigroup Inc., in dealing with the networks.
"But the fact that there's a change of bank ownership gets both MasterCard and Visa paying attention, because that's when decisions are made on network changes," Mr. Clark said. "It's an important opportunity point for the owner of Chase."
"Both Visa and MasterCard are public companies now, so both are viewing the big issuers as big customers," he said, and both networks "want to do what's necessary" to retain and expand their relationships with those customers."
Philip J. Philliou, a partner at the payment consulting firm Philliou Selwanes Partners LLC, predicted that JPMorgan Chase would consider wider industry implications, especially when deciding what to do with Wamu's debit portfolio.
In debit, "if you convert Wamu [to Visa], then essentially all the top issuers in the U.S. are Visa," Mr. Philliou said. "If you knock MasterCard out of debit in the U.S., long term, that can't be good for any issuer or the card industry in general."
