Do you ever look very closely at the logo of the payment processor on your debt card?
The chances are that, if you bank with one of the “big five” of Lloyds, Barclays, RBS/NatWest, HSBC or Santander – which is more than four in five Britons – you will see the Visa logo on it.
The vast majority of the UK population currently use debit cards that are run on the Visa network.
However, that is starting to change, as a new front in the war between Visa and its deadly rival, Mastercard, is opened.
The first salvo from Mastercard was fired when, in June last year, it struck a seven-year deal with TSB, in which the bank said it would reissue debit cards to all of its current account customers, taking them into the Mastercard network.
Image: Santander will begin migrating debit cards to Mastercard from 2019
The deal, described at the time by Ajay Banga, Mastercard’s chief executive, as a “significant win”, made TSB Mastercard’s largest debit card issuer in the UK.
Today, Mastercard has scored another coup, with news that Santander will begin migrating debit cards held by its nine million-plus current account holders on to its network from the beginning of next year.
With Virgin Money, Citibank, CYBG – owner of Clydesdale Bank and Yorkshire Bank – and Metro Bank also already issuing Mastercard debit cards, the addition of TSB and Santander mean Mastercard will have around a fifth of the market by this time next year.
Mark Barnett, divisional president for Mastercard in the UK, said: “We are excited about working with Santander, one of the world’s most trusted and innovative banks, to bring new and customer-centric functionality to their debit card offering.
“For us, this partnership is further proof that Mastercard’s debit card solutions offer all the flexibility, security and convenience banks and their cardholders require in the digital age and, with this agreement, Mastercard gains real scale in the UK debit card market.”
But what does a deal like this mean for customers?
In theory, not a lot. It is very rare to come across a retailer or merchant that accepts cards from one issuer and not the other.
In practice, it may well do in coming years.
Both Visa and Mastercard are having to fight harder to convince investors they are not simply providers of commoditised services in the face of competition from newer entrants to the payment services market, such as PayPal, which are perceived as offering customers more “value-added”.
Mastercard, in particular, has sought to reduce its dependence on its core payments processing business, by expanding into other fields of payments in recent years, such as peer-to-peer payments.
It is also investing more in offering security solutions to both banks and merchants, including the introduction of biometric authentication for cardholders, such as the “Selfie Pay” service launched in 2016.
The company is also working to provide card issuers with better data analytics that helps them pick up on fraud more quickly, as well as helping them make fewer “false declines”, which is the industry jargon for what happens when a card payment is wrongly blocked.
And, in probably the most tangible example for customers, Mastercard is making loyalty offers based on its sponsorship of events such as the BRIT Awards and the UEFA Champions League.
For Santander, there are also advantages. Banks save money when they can issue debit cards and credit cards on the same network as it enables them, in the words of a Santander spokesman, to “streamline our internal processes to create less complexity and a smoother all round customer experience”.
Do not expect Visa to take this lightly. The UK is its biggest market in Europe and it will seek to respond to Mastercard’s incursion into the debit card market.
The irony is that, in almost forcing customers to make a binary choice between them by striking exclusive deals with banks, Visa and Mastercard are turning the clock back.
Until the mid-1970s, US laws appeared to block banks from joining both credit card issuers, obliging them to join either Visa or Mastercard. The same laws did not apply elsewhere in the world but, nonetheless, most payments markets tended to follow the US example.
This meant Barclaycard became the provider of Visa in the UK, while NatWest, Midland Bank (now HSBC UK) and Lloyds joined forces in 1972 to launch the Access card, which operated on the Mastercard network.
That system broke down when, in June 1987, Barclays introduced debit cards to Britain under the “Connect” brand which, like Barclaycard, carried the Visa logo.
Shortly afterwards, Lloyds announced it would start issuing debit cards on the Visa network, making it the first UK bank to offer “duality”. Midland began offering both Visa and Access credit cards shortly afterwards but, with debit cards, it, NatWest and Royal Bank of Scotland joined forces to create their own network called Switch (now part of Maestro, owned by Mastercard).
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Over time, all three drifted across from Maestro to Visa, a process that now appears to be in partial reverse with Mastercard’s fightback.
The market is once again becoming “either/or”.