Seeking to Become More User-Friendly, Visa Will Eliminate Half of Its Operating Rules

In an effort to become easier for merchant acquirers, merchants, and card issuers to deal with, Visa Inc. late this year will eliminate almost 50% of its operating rules, which currently total more than 1,500 pages, chief executive Charles W. Scharf said Thursday.

Scharf made that revelation at Visa’s second-quarter of fiscal 2014 earnings conference call, in which he also noted that Visa is getting caught up in the international dispute arising from Russia-Ukraine tensions.

Scharf disclosed the rules cut after reminding analysts that Visa had talked earlier about simplifying its regulations and that it recently announced changes in its Fixed Acquirer Network Fee (FANF) to make Visa acceptance more attractive to small merchants with less than $15,000 in annual Visa volume.

“On Oct. 1st we will be eliminating close to half of our operating rules,” said Scharf in his opening remarks. “This includes reducing the complexity of our dispute-resolution processes.”

Asked by an analyst for more details, Scharf said the reduction is the result of feedback Visa solicited from issuers, merchants and acquirers. He said Visa’s reputation among those groups historically was that “we were probably pretty difficult to deal with.” The increasingly competitive payments market, however, apparently forced Visa to consider ways to become more user-friendly. “We want people to enjoy doing business with us, and that we treat them openly, fairly, and clearly,” said Scharf.

Visa asked issuers, acquirers, and merchants what they didn’t like and what should change in the rules, Scharf said. “A big part of the feedback that we received was on chargebacks and the processes that we had put in place, the reporting requirements, documentation, and things like that,” he said. More changes could be in the offing after Visa gets feedback about the October changes, according to Scharf.

Meanwhile, Visa is facing a possible loss of business in Russia, where 100 million Visa cards have been issued, as a result of U.S. economic sanctions on Russia in the wake of that country’s recent annexation of Crimea, a part of neighboring Ukraine. President Vladimir Putin is pushing for a national payments system, and Russia’s government is considering regulations that could take effect soon to keep Russian transaction processing and settlement operations within the country.

“We don’t know exactly what our position will be in the marketplace,” said Scharf.

In the United States, Visa reported healthy payments growth in the second quarter. The network posted total U.S. payment volume of $575 billion, up 8.5% from the year-earlier quarter.

Credit again led the way in growth, with $269 billion in U.S. volume, up 10.6% from $244 billion in fiscal 2013’s second quarter, on 3.15 billion transactions, up 10.7%.

U.S. debit volume continued its recovery after taking a big hit when the Dodd-Frank Act’s Durbin Amendment took effect in late 2011. Debit payments totaled $305 billion, up 6.7% from last year’s second quarter, on 7.99 billion transactions, an increase of 6.3%. In the 12 months ended March 31, debit volume totaled $1.21 trillion, up 9% after slipping 4.5% in the prior year.

Still, Visa is on the lookout for weakening debit card spending. “We think that there has been a downshift in debit spend, we saw some of it after the Target breach,” said chief financial officer Byron H. Pollitt. He noted, however, that April debit volumes have been encouraging so far.

Visa reported net income of $1.6 billion for the quarter, up 26% from a year earlier, on revenues of $3.16 billion, up 7%.