Playing Forecaster

  It's always dangerous making predictions, especially regarding something so fluid as the payments business. About the only thing one can say with certainty is the obvious-that cards and other electronic payment forms will continue to capture more share from cash and paper checks.
  But this month, a joint project by CCM and its sister magazine Card Technology probes what the future may hold for Visa and MasterCard. What lies ahead for the associations certainly is worth asking about considering all that they have been through in less than three years. This eventful period includes 2003's merchant settlements over debit card acceptance, the victory at the trial- and appellate-court levels for the Department of Justice in its challenge to Visa and MasterCard exclusionary rules, the Visa/First Data Corp. court fight over First Data's attempt to have some closed-loop Visa card transactions bypass the Visa network, and successful challenges by regulators to the associations' traditional pricing practices in various countries.
  Readers of CCM, CT, and our affiliated publications CardLine and ATM&Debit News have some pretty strong opinions about what the future holds for the card associations. In an e-mail survey of more than 6,000 readers that garnered 621 responses, 50% of respondents agreed or strongly agreed that 10 years from now, interchange rates, adjusted for inflation, will be 20% lower than they are today, while only 31% disagreed or strongly disagreed. Some 49% agreed or strongly agreed that the growth of processors such as First Data will significantly cut into the growth of Visa and MasterCard transaction volume compared with only 24% who disagreed or strongly disagreed, though a sizable 27% of respondents were unsure about the issue.
  Our readers are confident that despite the challenges of the associations' competitors, especially American Express Co. and now Discover Financial Services (which in May revealed that it, like AmEx, is seeking bank partners to issue its cards), the Visa and MasterCard brands still will be the strongest in the payments industry 10 years from now. Some 48% of respondents disagreed or strongly disagreed with the notion that the bank card brands will be weaker relative to those of their rivals, while only 35% agreed or strongly agreed.
  And while some observers believe that the case for signature-based debit has been severely undercut by the merchant settlements, only 36% of respondents agreed or strongly agreed with the statement that either PIN-based or signature-based debit will be around a decade from now, but not both forms. Some 51% disagreed or strongly disagreed, and just 12% were unsure.
  More data from the survey are in our two-part cover package beginning on page 36. There's no question that Visa and MasterCard will remain fixtures of the worldwide payments sector. But their ability to set prices for merchant acceptance that heavily favor issuers, keep a lock on the card business of their members, and keep regulators at bay is weakening.