Mastercard debit cards: why are they pinching UK Visa customers?

Digital payments are the latest industry a new generation of fintechs think needs to be disrupted, because when it comes to everyday payments, Visa and Mastercard continue to dominate the space.

The debit card market in Britain is important for gaining a foothold. UK Finance data shows consumers are 57% more likely to own a debit card than a credit card.

While Mastercard provides the majority of UK credit cards, it is eclipsed by Visa in the current account space.

However, the wind is starting to turn. Three major banks have switched their current accounts to Mastercard in the past two years. What drove this change and does it mark a bigger change from Visa?

Visa has long held a monopoly in the UK debit card space, but after striking three deals with leading banks, Mastercard is beginning to challenge their dominance.

Mastercard began to carve out a place at Visa by integrating a host of challenger banks including Chase, Monzo and Starling, but they are now beginning to take on customers from the biggest banks in a land grab.

First Direct, NatWest and, more recently, Santander have all shifted their customers from Visa debit cards to Mastercard debit cards over the past two years as Mastercard seeks to disrupt its dominance.

Last year, First Direct told its customers that the move to Debit Mastercard “means that we will be able to improve the digital payment options available to you in our app”.

Big banks have had to step up their game with their digital offerings given the growing number of more nimble challenger banks.

The likes of Starling and Monzo are partners of Mastercard although neither chose to comment on its decision to partner with the payments provider.

Gary Prince, Director and Chief Strategy Officer at SimplyPayMe, said: “The market was skewed in favor of Visa and Mastercard has made great strides on the innovation front…Mastercard in the UK and Europe has evolved in digital space.

“Mastercard is a big beast, but working with them as closely as I do…there’s a very integrated structure. There is autonomy in the UK and Ireland and they can act on the things they have to do. It’s a pretty flat structure,” Prince said.

In the end, it comes down to business terms…flexibility on pricing, requirements, speed to market.

Gary Prince – SimplyPayMe

Another reason Visa is falling behind in the digital space could be the acquisition of Visa Europe by Visa Inc.

“A lot of opinion leaders have left Europe,” Prince said. “A lot of things were run from the US and they didn’t have their eye on the ball…Ultimately it comes down to commercial terms…flexibility on pricing, requirements, speed of put on the market.”

Michelle Stevens, deputy editor of the Finder website, added: “Visa Europe, once owned by a collective of UK and European banks, is now part of the global Visa brand, removing any potential potential interest.

“Brexit also means that interchange fees charged by UK card issuers are no longer capped by EU rules.”

UK banks had had more incentive to work with Visa following the co-ownership, but Mastercard has been looking to regain market share since the acquisition in 2016.

Stevens added: “The recent episode between Amazon and Visa – where the online retail giant threatened to suspend the use of Visa credit cards due to rising fees – showed that card fees remain an important consideration for all involved.”

Santander has told its customers that it is introducing a range of new features as a result of this partnership.

These include a temporary freeze on a lost or stolen card and card controls which may restrict certain transactions such as contactless payments, online transactions, international transactions and gambling transactions. helped streamline his process.

A Santander spokesperson said: “We regularly review our third-party providers and the decision to switch our debit card provider from Visa to Mastercard was based on a wide range of business factors.

‘By working with a single card provider [Mastercard provider Santander credit cards]we were able to introduce a number of new digital features for our debit and credit cards – such as the ability for customers to manage specific payment types like gambling and overseas payments – faster and just as if we were creating two separate variants.


Visa and Mastercard are probably some of the most recognizable brands given that they are stuck on our debit and credit cards.

But how do they actually make money?

They earn money based on the volumes of goods and services purchased. Their network includes financial institutions, merchants and settlement banks and each partner receives a share of transactions.

When a customer swipes their card, the issuing bank approves the sale with the merchant and is cleared by its settlement partners.

The consumer is charged the full cost while the bank that issued the customer’s card pays the cost of the transaction less an interchange fee to the acquiring bank.

They can make money by charging processing fees to financial institutions on trading volume. It also derives revenue from other clearing, settlement and international cross-border transactions.

It’s mostly about transaction volume, which is why it’s so important that Mastercard has successfully partnered with Santander, First Direct and Natwest.

Why are there no competitors?

There is a clear lack of competition in the payments space; in the UK, American Express is the closest competitor, but it only offers credit cards.

“Unlike the banking industry, the payments industry arguably has not seen major disruption from the challengers.

“The complex nature of the payments ecosystem and the continued dominance of large card issuers creates a difficult environment for the emergence of large competitors,” Stevens said.

The introduction of Strong Customer Authentication (SCA) is a new European regulatory requirement aimed at reducing fraud and securing online and contactless payments and could disrupt the current landscape.

This means that shiny new digital payment fintechs like Stripe – based in the US – will be able to move into the space and start challenging incumbents.

Stripe, which was created by brothers Patrick and John Collison from Tipperary, is an internet payment provider that enables businesses to quickly process customer payments online.

Processing nearly 5,000 transaction requests per second, it takes a cut of around 1.4% and a flat fee of 20p per transaction and, thanks to the pandemic, has grown in scale.

Indeed, a Mastercard spokesperson told This Is Money that it sees the future “beyond the card” and recognizes that other payment channels will be “critical”. It seeks to move away from card “rails”, a platform that transfers money from a payer to a payee.

As part of this, it has introduced a new online payment option that allows customers to pay directly from the banking app on their phone, with which it has partnered with HSBC, Barclays and Natwest.

“The UK has been a unique market for debit cards. Visa has taken over the UK…Visa could only go one way which is down. Mastercard has, as an organization, worked very hard to figure out how to secure banks,” Prince said.

Does this mean more UK banks will make the switch? Nationwide said it had no plans to switch to Mastercard while other major UK banks declined to comment.

TSB had planned to switch millions of its customers from Visa to Mastercard in 2018 and told This Is Money that while it would not comment on business partners “like any bank, we will periodically review who is best placed to supporting TSB customers”.

All is not lost for Visa, Prince believes that while the tide has turned in favor of Mastercard, it is cyclical in nature.

Visa said, “We are proud to be a global payments leader and the partner of choice for banks, FinTechs and enterprises looking to create the best payment experiences for their customers.

“We remain the preferred payment method in the UK and in November 2021 Visa was ranked fifth best brand by YouGov.”

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