Digital Transactions Authoritative, insightful and timely information for payments professionals
Expect some unique credit card offerings in the next six to nine months now that a three-judge panel of the Second U.S. Circuit Court of Appeals has upheld an October 2001 U.S. District Court ruling allowing banks to issue American Express and Discover cards. American Express has already issued a statement saying it is talking to a number of banks and expects to have its first bank offering available by mid-2004.
And while Visa and some of its loyal members have questioned why any bank would want to issue a card in partnership with a long-time competitor, some industry analysts think AmEx and Discover may have a lot to offer select banks. Howard Mason, consumer finance analyst for New York-based Sanford C. Bernstein, notes that AmEx’s merchant fees are higher than what Visa and MasterCard charge through their interchange fees and AmEx could pass through some of that extra sum to the early bank issuers to get its program moving.
“AmEx could offer issuers a premium economic model to entice banks,” Mason says. He also notes that the availability of AmEx’s marketing prowess could be attractive to certain banks. Visa and MasterCard have said they will continue to appeal the case, however, and that could delay things further.
For one thing, a stay of the federal court decision in 2001 was ordered until the appeal could be heard, and nobody knows yet whether that stay will be lifted pending the appeals. But long-term, the card associations don’t have much of a chance with the courts, argues Lloyd Constantine, an antitrust attorney who represented retailers in suing Visa and MasterCard over debit card acceptance. “They have a small chance of even being heard by the Supreme Court,” he says, should the case go that far.
