More Issuers are Embracing A Single Brand's Offerings

  More debit card issuers are processing their PIN-debit card transactions through Visa USA and MasterCard Worldwide, reversing issuers' long-standing policies of not putting all their debit product support behind one brand.
  The change in banks' attitudes is a key reason why Visa's Interlink PIN-based point-of-sale debit network in March had more transaction volume than any other electronic funds transfer network, including those that also switch ATM transactions.
  Interlink is getting a lot of help from large debit card issuers, and the major card brands may be providing issuers with financial incentives as well, observers say. Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co., for example, all have moved most of their POS-debit volume to Visa/Interlink from Star. Visa also owns the Plus international ATM network that these issuers also support.
  Stacey Pinkerd, Visa senior vice president of consumer debit products, says the percentage of Visa check card issuers putting all of their PIN-debit support behind Visa/Interlink/Plus has grown dramatically. In 2003, less than 17% of check card issuers did so. The percentage grew to 39.4% in March, he says.
  "We're building on marketing success because more banks are looking for an integrated debit offering," Pinkerd says.
  But Visa is not alone in benefiting from this trend. Leland S. Engelbardt, MasterCard group head of global debit channel development, says seven banks, which he declined to name, have switched their PIN-debit brand support to Master-Card's Maestro point-of-sale brand. Master-Card also owns the Cir-rus international ATM network.
  "The trend is accelerating," Engelbardt says, referring to the overall debit market.
  The third player in this market is Discover Financial Services, which owns the Pulse EFT network. Discover is trying to develop a signature-debit product, though participation is low. Among the issuers of signature-debit Discover cards are Central National Bank and Trust in Enid, Okla., and Brenham (Texas) National Bank.
  There are a number of reasons why banks are making the shift to backing the debit programs offered by one product brand over using several independent debit networks, analysts say. For one, PIN-debit processing and switching began as a local industry. But the debit card industry has consolidated to the point where merchants throughout the U.S. accept Interlink, Maestro and Pulse cards.
  Indeed, by putting their PIN-debit brand support behind Visa, banks can ensure that their cards are accepted nationwide, notes Visa's Pinkerd.
  In MasterCard's case, its Maestro POS-debit brand is accepted worldwide.
  Favorable pricing and other incentives are among the reasons issuers are putting their PIN-debit support behind Visa and MasterCard, contends James A. Hanisch, executive vice president of Co-op Financial Services in Ontario, Calif.
  "I don't have any specific knowledge, but to entice a financial institution to make a change, there has to be an economic benefit," he says.
  Visa and MasterCard also have shifted some of their focus away from credit cards, notes John Bresnahan, an Edgar, Dunn & Co. director. "Their original business model was to promulgate credit," he says.
  That began to change, Bresnahan says, when the credit card market matured and bank issuers made strategic decisions to become payments companies that also offer prepaid gift cards, contactless cards, and PIN- and signature-debit products.
  Les E. Riedl, president of Atlanta-based consultancy Speer Associates, agrees that more banks have decided to get into a business with significant growth prospects. And with more than 80% of the world's transactions being done with cash, many institutions believe that debit is an effective growth product, he says.
  Moreover, Riedl says, more issuers are concluding that the best strategy to grow their debit programs is to reduce their participation in multiple regional EFT networks.
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