Visa Extends A Marketing Olive Branch to Merchants

  U.S. merchants, at least the biggest ones, are getting something back after all from interchange-rate increases that took effect in April. Launched in June, the Visa Incentive Network provides high-volume retailers access to detailed spending data on Visa Signature and Traditional Rewards card customers for use in developing targeted marketing initiatives.
  About 40% of Visa purchase volume is initiated with rewards-backed cards, says Jim McCarthy, Visa senior vice president. Visa raised the interchange for rewards-backed cards to offset issuers' costs to support the programs.
  However, in exchange for the higher interchange, issuers in April had to begin submitting to Visa their cardholder names and addresses as a qualification to participate in its rewards program. Though merchants never see the information, Visa will use the data to help them market to specific cardholders.
  Previously Visa could only support such marketing incentives using card numbers, McCarthy says. Having names and addresses enables Visa to market to specific cardholders based on their spending patterns.
  As an example, McCarthy says Visa could ask a merchant to develop its best offer, such as $15 off of any sale of $75 or more. On behalf of its member issuers, Visa would mail those offers to the cardholders the merchant wants targeted.
  "For the first time, Visa is bringing the aggregate power of Visa Rewards customers to bear for Visa merchants," McCarthy says. "Members get incremental spend on the card, consumers get offers they never had before, and merchants get high-transaction users."
  A spokesperson at MasterCard, which also raised credit card interchange rates in April, said the card association is offering nothing similar to the Incentive Network at this time.
  While McCarthy says Visa does not have the "bandwidth" to provide similar targeted marketing for smaller individual merchants, it is working to appease such retailers through category-based promotions. On June 1, for example, Visa launched a sweepstakes for supermarkets in which consumers can enter to win up to $36,000 to shop at a grocery store, McCarthy says.
  Some observers believe Visa was wise to launch the initiative. "It's a smart marketing program," says Ron Mazursky, a director at Edgar, Dunn & Co., a San Francisco-based research and consulting company. "It's something the associations, both MasterCard and Visa, have thought about but had not ventured into because of the complexity of it."
  The effort, however, will do little to quell merchant concerns about rising interchange rates. "If you think this is going to make us back off our efforts to lower interchange rates, that's not going to happen," says a spokesperson for the National Retail Federation.
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