Question

Case Summary

Visa and MasterCard are the two largest providers in the market for general purpose credit card network products and services.  Together, Visa and MasterCard account for 75% of the dollar volume of transactions, and account for 86% of the number of general purpose cards issued.  American Express, Discover/Novus, and Diners Club are the significant competitors in the general purpose card market.  Both Visa and MasterCard are joint ventures (associations) that are owned and operated by the member banks that issue cards and provide card acceptance services.  The member banks have an interest in both Visa and MasterCard (known as duality) and have representatives serving on the board of directors or important committees of both Visa and MasterCard.

Since the member banks of Visa and MasterCard have a significant interest in both Visa and MasterCard, they have little incentive or desire to compete directly against one another.  The member banks have refused efforts by MasterCard management to develop its brand through marketing campaigns.  The banks felt that this action would hurt the Visa brand, which the banks have a stake in.  They have also not supported new product development, unless the new development was available to both Visa and MasterCard.  In addition to avoiding competition between brands, the member banks have prohibited its banks from issuing competing credit cards, such as American Express and Discover/Novus.  They have also worked jointly to discourage merchant acceptance of competing cards and access to ATMs for cash advances.

Discussion Questions

1. What is the ownership structure of Visa and MasterCard?  How is the management set up to reflect this?
2. Who are the competitors for Visa and MasterCard?  What are the barriers to entry for new competition?
3. How does the dual ownership of Visa and MasterCard lessen competition between the two?
4. How have Visa and MasterCard worked to restrain its competitors from competing in the market?
5. What evidence is there that Visa and MasterCard would compete more aggressively without duality

Answer 1

• Visa MasterCard both are American based organizations catching the most extreme portion of market.   
• According to the diverse kind of enterprises, the two of them has a place with oligopoly structure where the two of them catch the most extreme offer holding of market leaving others with divided offer. The administration is finished by participation from two hands the two of them communicate with one another concluding the opposition.   
• The contenders for Visa and MasterCard are :

1.American express

2.PayPal

3.Bank of America

4.Jp morgan pursue and so forth.

• There are numerous boundaries to passage for new rivalry.The principle hindrance is venture and furthermore the acknowledgment of new card by the customers.As clients scarcely change to new card . There are numerous different reasons too which may incorporate creating of new card and the executives of its deals   
• Visa and MasterCard the two arrangements with advertise as a join adventure making duopoly of their own among the market of oligopoly of there industry leaving others to battle with one another. The two of them fixes evaluating by communicating with one another and keeps up their edges against the element of flawless serious industry who battle and diminish there costs and different advantages.   
• They control different contenders by there duality. The two of them filling in as group look at every single conditions winning among the money related establishments and banks , additionally offering them the best offers and motivating forces which help them to cover most extreme market by covering there greatest necessities leaving others to chip away at general purposes .Because of less covering of association premium and terms help the administration and the banks to collaborate with Visa and MasterCard leaning toward as need leaving others to collude.Instead of taking a shot at rivalry with showcase they can without much of a stretch work on highlights and advantages to be investigate all the more leaving different contenders at back.   
• Last however not minimal, as opposed to the present situation according to address on the off chance that the two of them forcefully bargain each other as ideal serious firms rather than duality then they will battle with one another at costs , motivating forces , advertise catch , client and greatest offer among one as duality they are getting a charge out of will be dispersed among them and not many to be moved towards other little offer holding firms which won't just misfortune them yet brings rivalry among themselves and bringing balance point to the most minimal simply taking there cost with less margins.Thus Visa and MasterCard must standard the market with there duality chipping away at new highlights as opposed to battling for showcase rivalry.