Like His Predecessor, Incoming Visa CEO Kelly Looks To Improve Merchant Relations

By Jim Daly
@DTPaymentNews

Charles Scharf accomplished a lot in less than four years as Visa Inc.’s chief executive—he oversaw Visa’s acquisition of Visa Europe, a groundbreaking peace accord with PayPal Holdings Inc., and a cobranding and acceptance deal with Costco Wholesale Corp., among other things—but one of his unfinished tasks was forging an armistice with merchants.

Now, with Scharf set to leave Visa Dec. 1, his designated successor, Alfred F. Kelly Jr., plans to pick up where Scharf leaves off.

“We will absolutely view the merchant world as extraordinarily important and we will be very, very focused on making sure that we’re an excellent partner to big and small and medium-sized merchants around the globe,” Kelly said late Monday in a conference call with Scharf and stock analysts.

Kelly is a Visa board member who earlier spent 23 years with American Express Co., rising to the rank of president. He currently is CEO of Intersection Co., a provider of touchscreens and other media devices.

Scharf, a former senior executive with JPMorgan Chase & Co., cited family reasons for his unexpected decision to leave Visa after heading the company since early 2013. Visa is based in the San Francisco suburb of Foster City, Calif. Most of his family remains on the East Coast.

“I don’t feel like I can spend the time necessary in San Francisco to do this job properly,” he said on the call. “While I loved working and running this global company, running a San Francisco-based company just doesn’t work for me personally right now, and wouldn’t be fair to Visa.” Scharf informed Visa’s board in mid-September that he planned to leave.

One of Scharf’s first initiatives was to improve Visa’s frayed relations with merchants, who for years had complained about Visa’s acceptance pricing and perceived heavy-handedness as the biggest payment card network. But despite Scharf’s olive branch and the recent Costco win, Visa’s relations with merchants have if anything become more contentious. A federal appellate court in late June threw out a years-in-the-making, $5.7 billion settlement that Visa, MasterCard Inc. and some banks struck with merchants in a class-action suit over credit card interchange and merchant rules. Now numerous merchants are suing the network over those issues.

Meanwhile, Wal-Mart Stores Inc., The Home Depot Inc., and The Kroger Co. earlier this year all filed suits against Visa (and, in Home Depot’s case, also against MasterCard) over transaction routing on EMV debit cards.

“Visa’s relationship with merchants has become even more contentious, and merchants now feel more inspired to find alternatives to the payment networks,” payments analyst James Wester, research director at Framingham, Mass.-based IDC Financial Insights, tells Digital Transactions News by email. “The issue that Scharf’s successor will face is that none of the big changes facing the legacy payment players are going to get any easier.”

While Kelly said Visa will be a good partner with merchants, he also indicated the company must balance the interests of other payments players with whom it also works closely.

“Number one, we want to make sure that we continue to be very, very focused on being a terrific partner to the people that we work with around the world,” he said. “The nature of the ecosystem of payments is that there is not just … one company that gets it all done, and we have issuing partners and merchant partners and technology partners around the world. And making sure that we’re in lockstep with all of them continues to be extraordinarily important.”

Aaron McPherson, a Boston-based independent payments analyst, says Visa is “still kind of caught between their bank stakeholders and their merchant stakeholders.” But going forward, “they to need to continue moving toward the merchants. I think the banks are increasingly charting their own paths, especially with faster payments. In terms of balance of power in the industry, I think it’s shifting toward the merchants.”

Besides performing its delicate balancing act between card issuers and merchants, one thing Visa will continue to do is develop digital payments, Kelly said. Wester credits Scharf with making strong moves in that area.

“The company has been smart in focusing on … financial technology,” says Wester. “The overall shift to electronic transactions has been good for Visa generally, but they haven’t focused on moving money alone. Examples of the technology focus include opening up their network to developers, the Visa Digital Commerce app, and the Visa Ready Program for Internet of Things application.”