European banks may be in talks to sell Visa Europe to US Visa Inc, aiming to set up a rival payment system in Europe, according the Wall Street Journal (WSJ).
Citing people familiar to the matter, the WSJ reports that the financial groups owning Visa Europe are planning to set up their own payment network. It would compete against Visa and MasterCard in processing debit and credit card transactions across the European Union.
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A Visa Europe board meeting to discuss the possible sale is scheduled for April and, according to WSJ’s sources, a decision might be made then.
The board may exercise a put option to sell its shares to Visa and thereby force Visa to pay a billion-dollar sum for the Visa Europe payments system.
A spokesperson for Visa Europe said that the company would "not comment on speculation", while Visa Inc has declined to comment specifically on the possible sale of Visa Europe.
Whilst holding the same brand, Visa Europe and Visa Inc. are currently two distinct companies: the first is owned by more than 3,700 European banks and the latter isg a public company floated on the NYSE. Visa Europe licensed the Visa brand from Visa Inc. since Visa went public in 2008.
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By GlobalData"The deal to sell the Visa Europe stakes has been rumoured for months in the European financial services community and it first came up at the time when some banks were looking at sellable assets with the aim of raising capital in the aftermath of the liquidity crisis," Francesco Burelli, partner at consultancy firm Value Partners, said.
The rumours about the establishment of a new scheme are likely to please the European Commission and the European Central Bank that have been pushing for years for the establishment of a European scheme as an alternative to the international card schemes.
Burelli added: "Given the dire need of liquidity of some of the European banks, the trail of failed attempts to establish a third European scheme including the recent demise of Monnet, I would not be so certain about a European-wide ambition from some key European banks to embark into another of initiative of this type. Nonetheless the pressure from the EC in this direction has been significant and I would expect it to remain a politically-driven priority in Brussels".
Aside from the speculation about the rationale behind such move, a put option would create many challenges to Visa Inc., not just because of duplication in roles and system but also because of the cultural differences between the two companies.
Operating in Europe within the context of the SEPA Card Framework and of the PSD would still require the separation between the scheme and the processing infrastructure, a condition that is not required in other regions in which Visa Inc. operates.
There are potential commercial benefits for Visa Inc. as it would significantly expand its footprint and provide access to high growth markets like Poland and Turkey. The market reaction to such initiatives is to be seen as there are obvious potential advantages to be considered within the context of a potentially expensive and challenging integration.
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