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Citigroup Inc.nearly quadrupled the number of debit cards it issues with its
purchase Monday of Wachovia Corp. The deal also has the potential to benefit
MasterCard Worldwide because New Yorkbased Citi is a MasterCard issuer and may convert Charlotte, N.C.-based Wachovia's Visa-branded cards to MasterCard.
Citi has not announced anything, but its possible conversion of Wachovia's debit
cards to MasterCard comes less than a week after MasterCard received some bad news.
New York-based JPMorgan Chase & Co., on Thursday purchased Seattle-based
Washington Mutual Inc.'s MasterCard portfolio. Chase, a Visa issuer, has not said what it will do with the portfolio, but observers are speculating.
"MasterCard can stand to win big in the future as Wachovia [a current Visa debit card issuer] is responsible for a total volume of $35 billion," Adil Moussa, an analyst with Boston based Aite Group, said in a statement. "This represents an opportunity for MasterCard to regain some of the ground lost to Visa after Royal Bank of Scotland Group announced that it was moving all of its debit volume to Visa and the potential change of networks from MasterCard to Visa if WaMu's MasterCard portfolio is converted by JPMorgan Chase."
Charlotte, N.C.-based Wachovia issued 10.4 million debit cards at the end of last
year, according to PaymentsSource.com, an ATM&Debit News sister Web site.
On the other hand, New York-based Citi had issued an estimated 6.4 million debit
cards at the end of 2007. With the Wachovia portfolio, Citi's debit card portfolio balloons to 16.5 million cards, according to PaymentsSource.
MasterCard will offer Citi incentives to convert Wachovia's debit card portfolio to
MasterCard because the new Citi portfolio will have a much higher purchase volume than it would have had without Wachovia's cards, Moussa says. The incentives could include lower interchange or lower authorization fees, he says.
With the addition of Wachovia, Citi's purchase volume will reach $47 billion annually, putting the portfolio into a higher tier and cutting expenses per transaction.
