A Hard Year To Top

  Every year has its superlatives, but it will be hard for the card industry to top the events of 2003. Of course, the ultimate news story was the settlement by Visa and MasterCard of the retailers' debit card class-action lawsuit lead by Wal-Mart Stores Inc., just as the trial was about to start. The main details are now quite familiar: Visa and MasterCard will drop their "honor-all-cards" rules that forced merchants to accept signature-based debit cards; they lowered debit card interchange for the last part of 2003, and they'll pay the plaintiffs more than $3 billion.
  Our nearly ended year would be quite memorable even if it weren't for the debit lawsuit. Giant processors First Data Corp. and Concord EFS Inc. agreed to merge, but the U.S. Department of Justice in October stepped in and sued on antitrust grounds. Did somebody say we've got a Republican administration?
  And 2003 witnessed what would have been unthinkable until very recently-Sears, Roebuck and Co. selling its huge card portfolio, for many years the source of most of the Big Store's profits.
  The subprime sector shrank, but cobranding enjoyed a revival, especially with the launch of the Starbucks and Disney cards from Bank One Corp.
  There was plenty more in '03, but enough of looking back. What can the payment-card community expect in 2004?
  As of mid-November, Visa and MasterCard still hadn't announced their 2004 debit card interchange rates as called for under the retailer settlements. What we do know is that merchants will get a chance to negotiate interchange individually for the first time. It seems likely, however, that the new arrangements will benefit big merchants much more than small ones.
  It's always safe to say that consolidation will continue. Prompted by Bank of America Corp.'s pending acquisition of FleetBoston Financial Corp., banks seem poised for another wave of mergers that will further concentrate the card sector. Perhaps even one of the remaining monolines will be acquired.
  Will First Data and Concord get to the altar? The combined firm would control Star and NYCE, the No. 1 and No. 2 debit networks, respectively-something the feds obviously don't want. I predict a compromise.
  No prognostication would be complete without a mention of smart cards, which are the perennial next big thing. In the U.S., they're gaining in some sectors such as transit (see page 14). But no retailers are yet imitating Target Corp.'s ambitious chip card-issuing and terminal-retrofitting project. The few Visa smart card issuers have retreated, and American Express is playing up the rebates on its snazzy Blue card rather than its chip.
  General-purpose smart cards are set to gain ground in Canada, however, and maybe that will have an effect on the U.S. But be patient.