MARCH 2004

VISA U.S.A. Transactions Were Up in 2003

Transaction volume on Visa cards in the United States grew by 11.6% to $1.1 trillion in 2003. The year-end results were welcomed by the card association which experienced one of its worst years ever in terms of litigation setbacks. In May 2003 Visa announced a settlement of the 7-year "Wal-Mart" class-action lawsuit which pitted the association against merchants that accepted its debit and credit cards. The settlement cost Visa $2 billion (payable in the coming years), lower interchange rates on its signature-based debit card product (meaning further loss of revenues in the coming years) and the end of its "honor all cards" rule which prevented merchants from picking and choosing which Visa-brand cards to accept.

To be sure, Visa remains the dominant firm in the transaction card business. According to a company press release, U.S. consumers and businesses used 429 million Visa cards to make 16.1 billion transactions in 2003. The company estimates that about $13 of every $100 spent by consumers was on a Visa card. Credit card spending volume rose 6.6% to $650 billion. Visa claims this represents a 57.4% market share of U.S. bank credit card purchases. Debit card volume rose 19.5% to $454 billion. Visa claims it has a 79% share of the signature debit market. Although the Wal-Mart settlement led both Visa and MasterCard to slash signature debit interchange rates by one-third on August 1, 2003, the total spending volume on signature debit still rose by 26% during the year.