By Andrew R. Johnson
Wal-Mart Stores Inc.'s co-branded credit cards will soon carry
MasterCard Inc.'s logo under a deal the retailer struck with
General Electric Co.'s banking arm to switch from Discover
Financial Services.
Wal-Mart said its credit-card portfolio will convert to
MasterCard later this summer, while credit cards marketed in the
name of the retailer's Sam's Club division will begin switching in
June, a spokeswoman for Wal-Mart said.
Co-branded cards such as Wal-Mart's typically offer discounts
and other perks for shopping at the retailer's stores. The cards
are issued by a bank, which in the case of Wal-Mart is GE Capital
Retail Bank. GE last month said it would spin off the
consumer-finance unit, to be called Synchrony Financial, through an
initial public offering.
Credit-card companies often battle for such partnerships when
they come up for renewal. MasterCard in recent years has been
fighting to win more co-branded partnerships to boost transaction
volume over its payments network.
A spokesman for Purchase, N.Y.,-based MasterCard said the
company has a "strong commercial relationship with Wal-Mart."
The switch to MasterCard won't prevent customers who have
Discover-branded cards from using them at Wal-Mart or Sam's Club
stores, a spokesman for Riverwoods, Ill.-based Discover said.
Discover has had a partnership with Wal-Mart since 2005, the
Wal-Mart spokeswoman said.
Discover said in a February regulatory filing that contracts
related to a third-party partnership will be terminated in the
middle of this year. The loss will have a "meaningful impact" on
the volume it generates from its network partners as well as
profits for its payment-services segment, though the company said
it didn't expect a material impact on its overall profits.
The deal is "nice" win for MasterCard but will likely have a
"fairly immaterial" financial impact on the company, Sanjay
Sakhrani, an analyst with Keefe, Bruyette & Woods, wrote in a
research note on Friday.
While big retailers like Wal-Mart partner with networks such as
MasterCard for credit-card programs, they have also tussled with
networks for several years over fees merchants pay to accept cards.
They argue that MasterCard and its larger rival Visa Inc. have
conspired to set the fees at arbitrarily high levels.
To attempt to put such issues to bed, Visa and MasterCard
reached a settlement in 2012 with merchants who brought
class-action lawsuits against the card networks in 2005.
The deal, which stands to deliver $5.7 billion to millions of
merchants, was approved by a federal court judge in December, but
many retailers have appealed.
They argue the settlement wouldn't stop swipe fees from rising
in the future and grants overly broad releases to Visa and
MasterCard from future litigation.
Wal-Mart filed a lawsuit against Visa last month alleging the
credit-card network's swipe fees violated antitrust regulations.
The retailer is seeking at least $5 billion in damages from Foster
City, Calif.-based Visa.
Visa and MasterCard set swipe fees, but they are collected by
banks that issue their cards.
Write to Andrew R. Johnson at andrewr.johnson@wsj.com
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