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Use of 'Plastic' Changing Rapidly

Visa's chief says technology is prompting 'significant breakthroughs' in the credit card industry.

August 29, 2003|Eileen Alt Powell | Associated Press

The credit card industry is anything but static these days, with new products and services coming at a fast pace.

Carl F. Pascarella, who has been president and chief executive of Foster City, Calif.-based Visa USA for a decade, calls this "a revolutionary time."

"The technology is changing so rapidly that I think we're on the edge of significant breakthroughs" in how credit and debit cards are used and processed, he said.

Pascarella spent more than a decade with Visa's Asia-Pacific division in Tokyo before moving back to the United States, where he now heads Visa's largest regional operating unit. It's a non-stock corporation owned by the nation's banks.

Visa USA has just passed the $1-trillion mark in transactions per year; it reached the $1-billion level in 1971. Debit, credit, prepaid and commercial transactions are processed at a rate of $32,000 a second.

The industry has weathered serious legal challenges. Visa and MasterCard in October 2001 lost an antitrust case brought by the Justice Department that is on appeal. This year, the card companies agreed to settle a class-action suit brought by Wal-Mart Stores Inc. and other retailers, which alleged that the companies' policies forced them to pay more for debit card usage because of the linkage to credit cards. Visa agreed to pay $2 billion and MasterCard $1 billion and both lowered transaction fees to settle the case.

Pascarella spoke about Visa and directions in the industry.

Question: You recently said, "We're no longer a credit card company, we're an electronic payments company." So just where are you taking Visa USA?

Answer: If you take a step back, Visa when it started was primarily a credit card company. In the mid-1990s, we made a concerted effort to mainstream debit. And today, debit is 51% of our transactions and about 30% of our sales volume, and it's growing about 25% year over year.... We've put a lot of time and effort into developing a commercial suite of products. They're growing at significant rates. So while credit is important, we look at ourselves as providing a payment solution overall.

Q: The key is to get people to stop using cash and checks, right?

A: Personal consumption expenditure is about $17 trillion, and we're 12% of that on our own. All the other card programs are roughly 12% as well, combined. So if you look at that, we're just scratching the surface. What we're all about is growing the entire payments industry. The growth engine is all about providing value to consumers and giving them the opportunity to use whatever payment device they want to use whenever they want to use it. We'll never get to a cashless or a checkless society. What we're looking for is less cash and less checks.

Q: How has the industry been affected by the recent court ruling in the Wal-Mart case?

A: First of all, we're very, very happy to have Wal-Mart behind us. We at Visa have three major parties to make the whole value proposition successful -- the consumer, naturally; the merchant; and the banks. I think now with that lawsuit behind us, we have an opportunity to go back and work with the merchants the way we have in the past ....The merchants are interested in ... guaranteed payment, they're interested in the consumers being able to get through the store and buy their goods or services.

Q: What innovations do you see coming in the card business?

A: We have to take what we have today to the next level, over the horizon, to new payment devices. Recurring payments, and -- it's all about using the Visa structure of the products and the services we have, the infrastructure of our telecommunications network, the infrastructure of our clearing and settlement.

Among the products and services we have is the payroll card. So many people today are un-banked -- they don't have bank or checking accounts. So we've offered to corporate entities the opportunity to pay their employees with a Visa payroll card. That payroll card is reloaded, and they [workers] can use it everywhere Visa is accepted. So instead of having to go to a check-cashing service, and paying a fee there and carrying around large sums of money, they now can carry a Visa payroll card, which is safe and secure.

Q: Why not one card that can validate a check today, work as a debit card tomorrow and a credit card the next day?

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