The local twittersphere has been going crazy today with two words that have become trending topics “Visa” and “Banelco” after news that banks are considering selling off those businesses. Although many have interpreted the La Nación scoop as the end of Banelco (one of two networks of ATMs in the country), the effect on users is set to be far less dramatic. And it could be a net positive for consumers as it comes at a time when both Congress and the administration are working to decrease the astronomical commissions that credit card firms charge businesses.
So before you start frantically calculating how to get as much cash as possible out of your account before it gets sold, just chill. First and foremost, this is still in the preliminary phase and there are no details as yet on the proposed sale. In fact, according to one La Nación source, “if the operation goes through, it’ll happen in May of next year.” Second, the fact that the company Prisma is set to sell Visa and Banelco doesn’t mean that they’ll go extinct: Banelco could just end up operating independently.
Angelina dejó a Brad, los bancos dejan a Visa y Banelco, falta que yo deje los dulces y ya estaríamos completando…
— Miguel DyT (@migueldyt) September 22, 2016
“Angelina left Brad, the banks are leaving Visa and Banelco, all we need is for me to stop eating candy and we’re done…”
Although the issue can be a little technical, on the face of it this is a simple question of anti-trust laws because Prisma has 14 big banks as shareholders and owns a plethora of companies. All that makes for one hell of a vertical integration. Prisma, which was only established in 2014, has control over three different steps of the production process involved in credit/debit cards:
- Banks, with its main shareholders being Galicia, Santander Río and BBVA Francés.
- Issuers of debit/credit cards, including Visa Argentina.
- The purchaser/processor, including ATM network Banelco and even online banking sites such as Pagomiscuentas.com
In Argentina, Prisma owns Visa Argentina and controls all of the transactions operated by Visa: about 60 percent of all overall credit card transactions. In addition, the shareholder banks like Galicia operate with Visa cards.
President Mauricio Macri’s government has taken a tough stance on the issue and has been waging a war against the commissions that credit cards charge businesses. Back in August, the country’s anti-trust agency (CNDC) pressed charges against Prisma for “abusing its dominant position.” The CNDC said Prisma may have created a cartel with its 14 owner banks.
This proposed sale then could be a wink in the government’s direction by the banks eager to appease the government and avoid sanctions.
The possible sale of Prisma comes at a time when the financial sector is also under fire for its commissions. Congress approved a bill earlier this month to force a decrease in the commission that credit card companies charge businesses. The bill received strong support from the Argentine Confederation of Medium-Sized Companies (CAME) as it would slash commissions from 3 percent to 1.5 percent for credit card operations and from 1.5 percent to zero for debit cards. It has yet to go through the Lower House (the bill was proposed in the Senate) but is set to be a game changer for consumers.
The CNDC also proposed modifying the Credit Card Law (Law 25,065) in order to promote a more competitive market and to regulate the exchange rate used by banks. Prisma, apparently, is just the tip of the iceberg to reform a system that desperately needs to change.