Commodities: USAA Switching Credit, Debit Cards to Visa From MasterCard

Sat Oct 24 17:57:20 2015 EDT

By Robin Sidel

     USAA, one of the nation's largest issuers of debit cards and credit cards, is switching its portfolio to Visa
Inc., representing a blow for longtime partner MasterCard Inc. which processed transactions on its network for roughly
30 years.

     The move is the latest in a continuing scramble of large portfolios that are hotly sought-after by Visa,
MasterCard and American Express Co. among issuers and networks. It is relatively rare, however, for a card issuer to
switch network affiliations after such a long relationship.

     Although it may not be a household name with all consumers, USAA is one of the largest financial institutions in
the country. It serves members of the military and their families, with extensive financial services ranging from
banking to insurance to financial planning.

     News of the switch was posted on USAA's website. A spokeswoman also confirmed the change.

     "As our primary network, this provides us the opportunity to provide more benefits, including the elimination of
foreign transaction fees for all USAA Visa cards in 2016," according to a statement on the USAA website.

     The change is a big blow for MasterCard because USAA is its biggest debit-card issuer with $26 billion of
purchases made on its cards last year, according to the Nilson Report, a Carpinteria, Calif.-based newsletter that
tracks the industry.

     MasterCard, which has been building its debit portfolio in recent years, said it is disappointed with the
decision. MasterCard's second-largest debit issuer is Fifth Third Bancorp, which had $20 billion worth of debit-card
purchases, according to the Nilson Report.

     "While we pursued the business, we reached a point where the economics did not make sense for our company and
shareholders," the company said in a statement. It will continue providing certain processing and other services for
USAA.

     USAA said most of the cards will be changed next year. They will have new card numbers and be embedded with a
computer chip that is aimed at providing more security than the traditional magnetic stripe.

     One of the most high-profile portfolio switches came earlier this year when American Express Co. ended its
16-year-relationship with Costco Wholesale Corp. in which AmEx was the only credit card accepted at Costco. The
wholesale club then entered an arrangement with Citigroup Inc. as its new card issuer and Visa as its new card network.

     Write to Robin Sidel at robin.sidel-wsj.com


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  (END) Dow Jones Newswires

  October 24, 2015 17:57 ET (21:57 GMT)

  Copyright (c) 2015 Dow Jones & Company, Inc.

102415 21:57 -- GMT

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