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No sooner had Charlie Scharf taken over at Visa Inc. than he was making nice to retailers. The new chief executive, surveying a history of frayed relations between card networks and merchants, spoke at Visa’s Investor Day conference early last month about building new bridges between the two camps.
He even touched on the loaded subject of pricing. “We don’t feel we have to raise prices to get the revenue growth we think we should, we want to compete on our capabilities and build the business in a way so that price is not the lever we have to pull for growth,” he said, as quoted by our sister publication Digital Transactions News.
He went on suggest that merchant relations were so fraught these days because Visa had failed to get across the real value of card acceptance. As a result, he said, merchants’ first impulse is to complain to politicians and regulators when they feel aggrieved by the payment networks and banks.
Now, Scharf came to Visa just a few months ago from JPMorgan Chase & Co., succeeding retiring chief executive Joe Saunders, so he has a fresh banker’s take on this subject as well as the network perspective. And goodness knows, a little TLC from giant Visa toward the merchants would be welcome.
But we thought there was something familiar about Scharf’s olive-branch approach. As payments consultant Eric Grover pointed out in a note to us, John Coghlan was making many of the same noises eight years ago. We even posted a news story back in July 2005 headlined “Coghlan’s Olive Branch Not Likely To Bring Retailer-Friendly Change.”
A former merchant who had just taken over the old Visa USA the day before, Coghlan told reporters he would sit down with merchants to try to hash things out. The prior month, retailers had filed the first credit card interchange suits that ultimately grew into the historic antitrust case whose settlement last summer seems to be unraveling before our eyes. In less than two years, Coghlan was out.
Will Scharf’s efforts at making peace fare any better? The current climate bodes ill. Nearly 8,000 merchants, including some of the nation’s biggest chains, have opted out of the credit card settlement and are free to bring their own interchange suits if they care to. Visa and MasterCard have already sued some of these merchants to undercut just such a case.
The danger for the networks and the banks is that credit card interchange will now go beyond the courts and wind up in the hands of federal regulators. Once that happens, no amount of sweet-talking will preserve the status quo.
John Stewart, Editor
john@digitaltransactions.net
