IMGCAP(1)]
Visa Inc., in capturing the debit card business of The Royal Bank of Scotland PLC from rival MasterCard Worldwide, not only strengthened its market share but set itself up to compete for the United Kingdom-based issuer's credit card business, according to analysts who commented to CardLine. Visa announced the deal Wednesday. RBS says it will start issuing Visa-branded debit cards in mid-2009. The bank has issued some 12 million debit cards in Europe and approximately 2.1 million debit cards in the United States, says Adil Moussa, an analyst for United States-based Aite Group. "In terms of scale, especially in Europe, it is a significant jump in market share for Visa, especially with the purchase volumes that RBS has," Moussa says. The move enables Visa to "build out their capabilities in debit," which is important because debit is gaining popularity relative to credit cards, notes Les Riedl, president of U.S.-based consulting firm Speer & Associates Inc. "The debit card [business] is where the upside is," he says. "This is a significant coup for Visa." Visa could decide to pursue the bank's credit card business, Moussa says. "Visa will do what it can to make an attractive offer to get more Visa credit [cards] issued with RBS," he says. "For RBS, it would be a chance to reduce their costs and consolidate their portfolio." Bank officials offered no immediate comment, but Moussa says 75% of the credit cards the bank issues in the United States carry the MasterCard brand. The deal raised questions about the relationship between Visa Inc. and Visa Europe. After Visa became a public company earlier this year, Visa Europe separate entityand has since insisted on its independence. When CardLine asked a Visa Europe spokesperson if Visa Inc. and Visa Europe negotiated the deal together, the spokesperson said "the deal was an aligned approach betwee "the two entities" and a great example of the global interoperability Visa Europe and Visa Inc. can provide to multinational banks." Both Moussa and Riedl say negotiations with the Royal Bank of Scotland likely began well before this year's initial public offering.
