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New Faces in Payment Cards

What if they changed the portraits on the $5, $10 and $20 bills to William Henry Harrison, Franklin Pierce and Warren Harding—and nobody noticed? In 2006, expect higher-profile changes in the payments space—and greater incentives for consumers to use cards rather than cash at the point of sale. With their contactless card initiatives and other micropayments strategies, card issuers are trying to expand their businesses by capturing from cash a larger share of small-ticket transactions. This will be particularly important if economic factors contribute to a decline in purchases of big-ticket items.

This year, consumers' wallets will contain other unfamiliar faces—or at least unfamiliar brand combinations. Stemming from the settlement of the lawsuit against the associations' "exclusionary rules," Citibank (New York; $1.48 trillion in assets) and Bank of America (Charlotte, N.C.; $1.11 trillion in assets) both will issue American Express (New York) cards, giving those banks additional chances to become the payment vehicle of choice. Discover also should benefit from the greater partnership options, now that Morgan Stanley (New York) CEO John Mack seemingly has laid to rest the will-they-or-won't-they-divest question. And consumers with less-than-perfect credit may see a new offering in the mail, with JPMorgan Chase (New York; $1.16 trillion in assets) expanding its presence in subprime cards. The bank also is promoting the affinity card relationships that came as part of the dowry with its Bank One merger.

There also will be new faces on the Visa (San Francisco) board of directors, which, under the new leadership of CEO John Coughlan, is restructuring to include a greater number of independent directors. And finally, there will be a new name in many investors' portfolios when MasterCard (Purchase, N.Y.) goes through with its pending IPO. That very well may entice new faces into the payments industry—think telecom, Internet or both—who believe that they can find a way to make some hay out of a global payments brand. --Ivan Schneider

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