Two Credit Card Camps Tilt Brand Building vs. Efficient Processing - Visa vs. Mastercard

Brandweek, June 7, 1999 by Terry Lefton

Later this month, a reconstituted MasterCard U.S. board sit down for the first time with industry heavyweight Citigroup, which bolted Visa's board early this year after the overwhelming market share leader rebuffed its attempts to let banks do most of their own marketing.

Citi, for years the country's top credit card issuer, had requested that Visa leave marketing to the banks and remove the financial burdens of centralized marketing. Now that Citibank has switched allegiance and pledged to eventually convert its portfolio, the industry is watching to determine what price it exacts from MasterCard. Some see it as nothing less than an end of the "duality" system under which the banks that issue the cards and comprise the associations issue both brands, while simultaneously agreeing not to issue competing brands such as American Express and Discover. Duality was already under scrutiny by the Justice Department as anti-competitive.

"What we're seeing evolve is two fundamentally different business models," said Visa evp marketing Michael Beindorff. "We're committed to investing in a strong brand, and MasterCard is moving to becoming an efficient network processor and letting issuers do their own marketing."

Zigging when the other guy zags is a strategy any perennial No. 2 must use. In the early 1990s, during the co-branded credit-card wave that redefined the market, MasterCard successfully courted the likes of GM and AT&T, resulting in its first share gains in more than a decade. Citi, which spends $32 million annually advertising its own credit cards, also wanted to move the Visa logo to the back of cards, an emphatic display of marketing independence that has some support from other issuers. While MasterCard's board has yet to vote on the matter, officials as high as CEO Robert Selander see that as inevitable.

Execs from both sides point out that the original marks of both associations have shrunk over the years. Is Citi's presence going to help or hurt a MasterCard brand currently on a high with some of its best creative work ever, the "Priceless" campaign from McCann-Erickson, N.Y.?

If Citi's insistence on do-it-yourself marketing is the same at MasterCard as it was at Visa, you'd have to believe overall brand efforts will suffer. Not so, says Nick Utton, recently named MasterCard's chief marketing officer. "'Priceless' [now in more than 30 countries] has turned us around by every measure, so I would tell you that we will continue to invest in the brand just as we have," he said. Since 1995, MasterCard media spending has doubled, from $78.5 million to $157.4 million last year, per Competitive Media Reporting.

While there has been some speculation that Citi's presence and overall industry consolidation will vest greater influence with larger issuers, at least one smaller issuer is welcoming Citi.

"Citi coming over has to mean a share shift in MasterCard's favor," said Ron Zebeck, president of Metris, the 25th-largest issuer, per Credit Card News. "My bank has the same board representation as Citibank, so I don't believe you'll see drastic change," added Zebeck, who's chairman of MasterCard's U.S. Region Board but stressed he was not speaking for the board.

So the question remains, what price did Citi extract from MasterCard in order to join? The answer is still elusive.

"Not until [Citi chair] John Reed sits down at the board table and says he doesn't want to pay for advertising will we really know how this is going to play out," said a bank marketer privy to some of Citi's remonstrations prior to bolting the Visa camp. "But the landscape is definitely changing."