Is Visa predatory ?
This is the first in a series of articles dealing with the BC-Visa dispute. ― ED.
By Kwaak Je-yup
The Visa-BC Card dispute seems bizarre for a breach of contract case.
First, Visa can and did take monetary punitive action against BC Card and withdrew $100,000 in June and an undisclosed amount in July from a special account.
The fine was withdrawn even though BC protested and took the matter to the Fair Trade Commission (FTC) with the case pending, reinforcing BC’s claim that their contract is predatory.
Secondly, Visa is selective in carrying out punishment.
When holders of China UnionPay (CUP), the Chinese card monopoly, used BC to bypass Visa fees for their spending in Korea, CUP was at least equally accountable. But Visa chose to fine BC, leaving CUP out of the fray. Visa is separately pressuring China to open up its card market through procedures at the World Trade Organization (WTO).
The other part of their dispute concerns BC enabling its users to make transactions on Star Networks, an ATM system in the United States, and save Visa fees in violation of their contract.
A Visa spokesperson declined to comment, saying only, “Around the world, the same rules should apply, and so it is difficult to make exceptions for BC.”
Obviously, it doesn’t.
A BC spokesman said that the contract was unfair. However, Visa and BC declined The Korea Times’ request to view their contract. An expert notes the uniqueness of their contract.
“It’s strange that Visa would fine BC, (which is) in a way its competitor,” said Eric Grover, payment system expert and principal at Intrepid Ventures, a Menlo Park, Calif.-based investment advisory firm. “It should be the banks and credit card issuers that get fined, like in China.”
The Chinese press reported last year that Visa sent written warnings to the CUP card-issuing local banks about using the Chinese payment system for international transactions for co-branded cards, saying they risk a $50,000 fine, then an additional $25,000 every month after that. But according to Grover, no action has been taken.
Nothing was imposed on CUP or Star Network either. No known action has been taken against the Global ATM Alliance, a set of shared bank networks that allows customers of banks like Bank of America, BNP Paribas, and Deutsche Bank to withdraw cash from each other’s networks without additional charges.
Visa cites two problems with BC Card. First, when a Chinese shopper with a co-branded CUP-Visa card makes a purchase at a Korea-based merchant, he or she is given the option of going through a commission-free option of CUP ― via the BC network ― or a more expensive Visa. The choice is not difficult; but Visa is losing money on what they claim to be contractually-agreed commissions on international payments. Second, when a BC-Visa cardholder withdraws funds from a Star Network ATM in the U.S., the customer also bypasses VisaNet, incurring no commission. Single-branded cards, bearing only a BC or CUP logo, are unrelated.
An FTC spokesperson offered no comment, citing a policy that prohibits the discussion of ongoing cases.