AQN Payments Monthly – April 2019
AQN Payments Monthly is AQN’s monthly roundup of the biggest and most significant stories from the payments industry. It is curated by AQN’s Head of Payments Intelligence, Caio Mattos. If you would like to get the newsletter delivered straight to your inbox each month, you can subscribe here.
Apr 2nd – Delta Airlines renews co-brand relationship with Amex for an additional 11 years through 2029. (Source – Bloomberg)
AQN's Take – This is a major win for AMEX and ensures they will retain one of their largest co-brand portfolios for the foreseeable future. With American locked up with Mastercard and Delta's extension with AMEX the question becomes - will Visa be able to retain United? United, which is reportedly in negotiations with Visa/Chase for a renewal, now has all of the negotiating leverage given they are the only one of the big 3 domestic airlines not locked up under existing agreements.
Apr 2nd – Wells Fargo to issue contactless cards for their debit and credit products. (Source – Bloomberg)
AQN's Take – Contactless adoption continues to rise on the issuing and acceptance fronts. This will be a tailwind for issuers and a headwind for merchants as issuers are positioned to continue gaining market share at the expense of cash transactions and merchants will continue to see their average acceptance costs rise as a result of shifting card spend, specifically to higher cost credit products.
Apr 16th – Mastercard adds new benefits for all World and World Elite cardholders partnering with Lyft, Boxed, Fandango, and Postmates for launch. (Source – US News)
AQN's Take – This is a smart move by Mastercard to add value to their rewards card, thus incenting more issuance, through what looks like merchant funded rewards. In addition, this move allows Mastercard to position itself to be in an advantageous position to pitch all of these growing brands if they ever decide to issue co-brand products.
Apr 12th / 13th – Visa & MC update their interchange rates; Mastercard eliminated data rate 3, T&E levels, large ticket rates, and added a level 5 interchange tier to their SB credit rate table. (Source – Visa & Mastercard)
AQN's Take – The drastic changes made to the Mastercard SB interchange rates will make issuing MC SB accounts much more profitable and thus lead to a more competitive product to Visa SB and ultimately increased market share. This will have an opposite effect on B2B heavy merchants with high transaction sizes which will be faced with MC SB rates as much as 1.4% higher than before the update.
Apr 22nd – Visa launches a set of APIs for issuers to create digital driven experiences through Visa Next, a new destination for accessing new solutions from Visa. (Source – Marketwatch)
AQN's Take – Through this new offering Visa is further engraining issuing partners into their ecosystem making them more sticky over time. There will have to be a strategic decision that issuers will have to make on whether to invest on internally building similar functionality or leverage Visa's offerings at the risk of growing dependent in the future and not having network flexibility.
Apr 29th – Visa / Mastercard agree on EU deal to cut interchange fees on foreign issued cards used within the EU. (Source – Financial Times)
AQN's Take – This move is a boon to EU retailers, specifically tourist heavy businesses, but is negative for US issuers as international spend share continues to rise and EU is a top US tourist destination leading to diminished interchange economics. As transactors continue to rise and further pressure is put on spend margin due to moves like this it becomes increasingly important as an issuer to be transactionally optimized to effectively compete.