European banks contemplating sale of Visa Europe - WSJ

European banks contemplating sale of Visa Europe - WSJ

European banks are considering cutting their ties with Visa Europe to set up an alternative bankcard scheme, the Wall Street Journal has reported.

Citing 'people familiar with the matter', the business broadsheet states that a Visa Europe board meeting to discuss whether the group will exercise its option to sell the business to its US counterpart Visa Inc is scheduled for April.

While they share the same brand, Visa Europe and Visa Inc are separate entities, with the US business listed on the new York Stock Exchange. Visa Inc. has a call option to buy shares in the bank-owned European organisation, while Visa Europe's members have a put option to sell them to Visa Inc.

Discussions among European banks to exercise the option have reached an advanced stage, states the WSJ source, following a meeting in London this month between banks and their advisors.

The European Central Bank has been pressurising the bloc's banks to set up an alternative card scheme that would break the Visa/MasterCard duopoly and speed up the move to a Single European Payment Area (Sepa) for debit cards. The ECB points to China UnionPay as an example of a new bankcard brand that can quickly gain acceptance with cardholders.

A sale of Visa Europe would likely yield $3 billion and provide a monumental headache for Visa Inc in handling integration and regulatory issues.

Comments: (5)

A Finextra member
A Finextra member 20 March, 2013, 21:262 likes 2 likes The creation of a alternative scheme has been in the air for years now and all initiatives has proven to be very challenging and non of them is a market success. Why is this suddenly in the air ? Can anyone explain why the European banks after having sold Europay to MasterCard in the early 2000 and joined their forces to create Visa Europe are they now reproducing the same scenario, without having an alternative ready?
A Finextra member
A Finextra member 21 March, 2013, 09:121 like 1 like

I see the "alternative bankcard scheme" as spin and a useful cover story rather than of great substance. 

A European scheme has not got off the ground for over 25 years and was originally first proposed when there was actually a European scheme in existence called eurocheque International.

The French and German banks finally need the money given the financial crisis. This should be extremely positive for the Visa brand.

The euro scheme will get talked of but may never see the light of day. CUP is different as the authorities there have a way of making things happen which is not the case in Europe.

The Visa split never made business sense and created unnecessary duplicate investments in Europe.  

Eric Smith
Eric Smith - Dynamic Partners - London 21 March, 2013, 10:321 like 1 like

You talk here about how such a sale would "provide a monumental headache for Visa Inc in handling integration and regulatory issues".

Setting up a new bankcard scheme would also cause European Banks a "monumental headache", not to mention the cost involved. With all the problems the Eurozone and broader EU are having, I don't imagine there's really a lot of money for this kind of investment.

It may all be simply a ploy to have Visa in the US take the European Banks a bit more seriously and to listen to them when they talk about topics like SEPA.

 

Nick Collin
Nick Collin - Collin Consulting Ltd - London 21 March, 2013, 10:381 like 1 like

I agree with Harin.  A separate member-owned Visa Europe was always an anachronism so this move is good for all parties and nothing to do with an alternative scheme which has been talked about for years but seems increasingly unlikely.

Arjeh Van Oijen
Arjeh Van Oijen - unchain.io - Amsterdam 22 March, 2013, 09:301 like 1 like

Would it be possible that European banks are planning a mobile only payments scheme that has a more cost effective setup than the traditional card processing infrastructures and gives them new business opportunities in the future? If that is the case, the biggest challenge I foresee for such an initiative is to come to an agreement on interoperable standards (which tends to take long) and the implementation of these standards at the checkout (cash register or POS) while the time to act is short as the competition won´t stand still.

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