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Visa Inc.’s decision to license a version of its VisaNet processing network to JPMorgan Chase & Co. generated controversy in merchant-acquiring circles when the two companies announced their deal in February, but now Visa says it is getting inquiries from other client financial institutions that may be interested in similar deals.
“We are actively involved in talking to institutions of all sizes,” Visa chief financial officer Byron H. Pollitt said Wednesday during the company’s earnings conference call for its second quarter of fiscal 2013 ended March 31. “I would describe them as very, very different types of conversations with people having different capabilities and different desires,” he said, according to the Seeking Alpha transcript service.
Pollitt did not name any clients or say if they want programs exactly like Chase’s. But he did say that “if we can do things with them that would help them grow their business and help us grow payment volume, that’s something we’re very excited to do.”
Chase, the nation’s No. 2 merchant acquirer as well as the No. 1 bank credit card issuer and a leading debit card issuer, will license a version of VisaNet as the core of its new Chase Merchant Services (CMS) unit. CMS will directly process transactions from holders of Chase-issued Visa cards when they make purchases at Chase merchants. Chase will pay Visa an undetermined sum for the 10-year license, but will get more control over card-acceptance pricing and rules as well as greater ability to offer its cardholders deals from merchants in its acquiring portfolio.
When the deal was announced, some observers wondered if the new model might undermine the traditional role of merchant acquirers. New Visa chief executive Charles W. Scharf, however, said the Chase license is an example of Visa’s new commitment to being more flexible as the payments industry rapidly evolves.
“We want to help issuers, acquirers, and merchants of all sizes work more closely together to take full advantage of the opportunities emerging across the industries, and to that end we are in active discussions with other partners on ways to use our network to help them differentiate,” said Scharf, according to Seeking Alpha. “If clients are interested, we’re willing to pursue customized arrangements that make sense to their own business needs.”
Scharf, meanwhile, said Visa is not planning a digital-wallet fee like MasterCard Inc.'s, but in response to an analyst's question he did say that PayPal Inc., the biggest digital-wallet provider, is “a very important customer” of Visa's but that Visa's relationship with PayPal and other wallet providers “is complicated.” Visa is considering “the right way to restructure the ecosystem in a way that works for everyone” and will announce specific plans later, he said.
Visa reported that its combined U.S. credit and debit card payment volume hit $529 billion in the second quarter, up 4.1% from $508 billion a year earlier. Credit card payment volume once again posted strong results, increasing 9.1% to $244 billion on 2.84 billion transactions, up 9.3%.
U.S. debit purchase-volume growth lagged well behind credit’s, increasing only 0.3% from a year ago to $285 billion on 7.52 billion transactions, up less than 0.1%. Volume on Visa’s Interlink PIN-debit network, which has seen transactions fall by more than half as a result of Durbin Amendment regulations that shifted volume to competitors beginning about a year ago, shrank in the mid-teens, according to Pollitt. But volume on Visa debit products grew 12%. Those products include Visa’s signature debit cards and the PIN-Authenticated Visa Debit (PAVD) program than enables Visa to process PIN-debit transactions even if a debit card doesn’t carry the Interlink brand.
Visa posted net income of $1.27 billion, 2% from fiscal 2012’s second quarter, but profits increased 17% when the prior year’s results are adjusted for deferred tax liabilities. Operating revenues grew 15% to $2.96 billion.
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