After almost a decade of partnership with Discover, Wal-Mart and its subsidiary property Sam’s Club have elected to enter into an agreement to make MasterCard their go-to payments network for handling all transactions on its store-branded credit cards. The switch to MasterCard comes as part of finalizing an agreement with General Electric’s Capital Retail Bank, which will be the store card’s issuer.
“The conversion of the Wal-Mart and Sam’s Club co-brand programs to MasterCard is further evidence of the strong and growing partnership between our organizations for the benefit of consumers,” Craig Vosburg, MasterCard’s chief product officer, wrote in an e-mailed statement to Bloomberg.
The full conversion to MasterCard will begin later in 2014, according to the mega-retailer, with new Sam’s Club cards to be issued in June, and rebranded Wal-Mart cards to follow by the end of the summer. The Wal-Mart and Sam’s Club Discover cards issued by GE Capital bank will be phased out over the next year. Other cards issued directly by Discover will continue to be accepted at Wal-Mart locations.
Discover had foreshadowed Wal-Mart’s change of processing network in a February 2014 regulatory filing, wherein it indicated that contracts related to a third-party partnership would be terminated part way through the year. Discover further noted that the end of the relationship would negatively impact the volume it generates from its network partners and the profitability of its payment-service sector.
Discover does not, however, think the change will materially influence its overall profits. The market has so far born that out, upon the announcement of the change Discover shares were up 0.2 percent to $59.57
MasterCard and Wal-Mart’s stock were both relatively unaffected by the announcement - they were both stable at $74.55 and $77.49 respectively on Friday.
Visa’s stock was down Friday on the announcement, with a 2.07% drop that made it the Dow's worst performer for two weeks in a row. Though Visa was not directly materially hurt by the deal, the guaranteed millions in revenue every year for its rival was not good news for the company’s stock price. This is the second piece of Wal-mart related news to exert negative pressure on Visa, two weeks ago the Bentonville, Arkansas-based retailer filed a $5 billion lawsuit over debit card swipe fees against the nation’s largest payments network.