USAA Moves Credit Portfolio from MasterCard to Visa
USAA, one of the largest issuers of debit and credit cards in the United States, has announced it will move its portfolio to Visa after a 30-year relationship with MasterCard. The United Services Automobile Association provides financial planning, banking and insurance to members of the U.S. military and their families.
The Wall Street Journal first reported the switch, and said this shift is indicative of a larger change in the financial services community. Financial portfolios have been transferred more often as Visa, MasterCard and American Express compete for these large accounts. However, it is rather unusual for such a long relationship to be severed.
This new partnership represents the power that card issuers have over payment networks when they negotiate long-term deals. The competition has intensified in recent years, as retailers have increased leverage over card issuers and aim to get better rewards for customers.
According to a statement on the USAA website, the financial institution made the switch because, “As our primary network, [the Visa deal] provides us the opportunity to provide more benefits, including the elimination of foreign transaction fees for all USAA Visa credit cards in 2016.”
MasterCard has confirmed the switch but said it will not affect its revenue and profit outlook. “While we don’t like losing anything, this is part of our business and we factor this into how we work.”
According to a Nilson Report, this is bad news for MasterCard, since USAA is its largest debit card issuer and accounted for more than $26 billion of debit card purchases last year. Fifth Third Bancorp, which is MasterCard’s second largest debit card issuer, accounted for $20 billion of purchases.
USAA told customers the cards will be changed next year, and cardholders will be given a new account number.
Economic details about the new partnership have not been released.