Visa Warns Banking Industry against Sears' Credit Card

By Kutler, Jeffrey | American Banker, August 21, 1986 | Go to article overview

Visa Warns Banking Industry against Sears' Credit Card


Kutler, Jeffrey, American Banker


Visa Warns Banking Industry Against Sears' Credit Card

For Visa U.S.A., this is "Knock Discover Week.'

Kicking off an awareness campaign with a series of meetings around the country, the bank card organization is warning member institutions that Sears, Roebuck and Co.'s new credit card poses a clear and present danger to the banking industry.

It is the first time Visa has organized such an offensive against a competitor. Visa executives said they are merely looking after the interests of member financial institutions facing a potent new product line.

They add that Visa does not dictate how members should respond, which would be against the law, but they do present some alternatives.

In one past controversy, Visa vocally advocated a money market fund-type account for the banking industry before it became legal in 1982. It also has urged member banks against enriching American Express Co. by selling its travelers checks and gold credit cards.

The anti-Sears message is more insistent than past involvements and points up the respect with which Sears is regarded as a marketing organization.

Officials of the Dean Witter Financial Services Group, which is responsible for the Discover program, said they were aware that Visa took them seriously but declined to comment when asked their reaction to the meetings.

In a recent speech to the Graduate School of Retail Bank Management at the University of Virginia, Visa U.S.A. president Charles T. Russell called on the banking industry to blunt Sears' attack to set a cautionary "example for other predators.'

Visa's educational effort, which includes a telephone hot line that bankers can call for competitive intelligence on Discover, is aimed at bankers who may not have considered the full implications of the financial service strategies that revolve around Discover. Sears introduced the card nationally in January 1986 after several months of regional testing.

Visa executives discussed Sears' ambitions in presentations that were scheduled for Tuesday in New York, Wednesday in Chicago, and Friday in San Francisco. About 130 bankers had signed up to attend.

Outsiders were not admitted but John Bennett, Visa's senior vice president of marketing, stated the message in an interview with the American Banker: "Discover is not just a credit card threat, but a banking threat. It is the totality of retail banking revenues that Sears is after.

"So we tell our members to delay on the question of giving Sears and the Discover card access to our depository facilities, clearing and settlement systems, or automated teller machine networks. We don't want to give Sears the benefit of what the banks have spent 15 years to build. We don't want to contribute to Sears' success.'

Visa is concerned, he said, that many credit card bankers, absorbed in day-to-day operations and marketing during a highly profitable period, "may have their nose up against a tree and haven't had the opportunity we have had, as an association staff, to see the forest beyond.'

Local bankers, Mr. Bennett went on, might tend to regard the nearby Sears store as a good, loyal business customer, and not be on guard when the Discover organization asks for admission into the bank-controlled payment system.

"If people take the time to look at what Sears is doing, they will see it as a fox in fox's clothing,' Mr. Bennett said, referring to some observers' contention that Sears is using Discover to disguise its evolution into a nationwide bank.

He said Sears has done nothing to hide its objective of becoming a premier provider of banking and financial services. It already has more than 300 multi-service financial centers in Sears stores, claims to have issued 4.7 million Discover cards on the way to a goal of 10 million by 1987, has stated a goal of $20 billion in deposits for California-based Sears Savings Bank (it is now at $5 billion) by 1992, and is spending $40 million this year to advertise and promote Discover, via commercial spots on highly rated television programs and in Sears stores. …

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