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July 24, 2019updated 22 Jul 2022 4:58am

Mastercard ramps up UK debit card attack with Nationwide win

By Patrick Brusnahan

The UK debit card sector has historically been dominated by Visa, with a market share of over 95%, but that is now under attack as Mastercard steps up its debit card push: the UK’s largest building society, Nationwide, is to issue Mastercard debit cards for the first time, reports Douglas Blakey

Nationwide is to issue Mastercard debit cards for the first time, in another significant win for Mastercard.

The move coincides with Nationwide readying plans to roll out its first business banking service, targeting the UK’s 5.6 million SMEs.

The UK debit card market is dominated by Visa, but that dominance is now under attack from Mastercard. Until 2016, Visa Europe was owned by a co-operative of European banks, but in 2016 in a deal worth $21bn, Visa Inc. acquired Visa Europe. At the time, analysts forecast that, as a consequence of the deal, Mastercard would be well placed to target Visa’s market dominance.

Last May, Santander announced plans to switch from Visa to Mastercard for its more than nine million debit card customers. Santander, which enjoys a market share of around 10% of UK debit cards, will begin issuing Mastercard debit cards to all its retail customers from the fourth quarter this year.

In addition, TSB agreed a deal in June 2017 to switch its debit card customers from Visa to Mastercard-branded cards. The TSB-Mastercard deal is part of a seven-year agreement, and TSB continues to issue Mastercard credit cards over the same term.

The TSB deal represents a significant investment by both parties, and demonstrates Mastercard’s commitment to increasing the issuance of its debit cards in the UK. TSB customers represent 4.5% of all current account customers in the UK.

The partnership includes TSB commercial cards, which will enable TSB’s small but growing numbers of business customers to take advantage of enhanced functionality to control and add flexibility to their spending.

But implementation of the TSB deal has been pushed back following TSB’s much-publicised IT issues in 2018. TSB initially planned to transfer its customers from Visa debit cards onto Mastercard in a major migration, but the move remains delayed.

Nationwide debit cards

At Nationwide, the society will issue Mastercard debit cards to business customers from early next year.

Nationwide’s new business proposition recently benefited from the Board of Banking Competition Remedies’ Capability and Innovation Fund. In particular, Nationwide will receive £50m ($61.9m) from the fund, designed to boost competition in business lending by granting awards to challengers.

Mark Barnett, divisional president at Mastercard UK, Ireland, says: “Nationwide is part of the fabric of the British high street. We are thrilled to be working with them as they embark on this journey to build a new business offering.

“Over the past few years we’ve become the payment partner of choice for challenger banks and fintechs. There is a lot of innovation right now when it comes to small businesses and payments. The next 12 months will be key, both for new entrants and incumbents. It is an exciting time for the sector, and we hope to be at the centre of it.”

Simon Hamilton, MD at Nationwide for Business adds: “We are aiming to disrupt the business current account market. These partnerships will help us do just that.

“Our partnership with Mastercard will enable us to offer a best-in-class banking experience for small businesses across the UK. We will offer the ethic of care and human service that Nationwide is famous for, and overlay a modern digital experience that puts everything business owners want and need directly in their pocket.”

Other Mastercard UK debit card customers include CYBG brands Clydesdale, Yorkshire Bank and Virgin Money. In addition, challenger banks Metro Bank and Monzo issue Mastercard-branded cards.

Mastercard’s recent success in winning new business means that once all UK partnerships previously announced go live, it will have close to a 20% share of the UK market.

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