James M. Lyon, First Vice President of the Federal Reserve Bank of Minneapolis, gave a presentation to the Minneapolis Fed's board of directors on Jan. 19, 2006 about bank card interchange fees. An article based on his presentation titled "The Interchange Fee Debate: Issues and Economics" is now available on the Minneapolis Fed's web site.

Lyon concludes: "The Fed, clearly, has no jurisdiction in this dispute and will not be intervening as either side would wish. Undoubtedly, the matter will play out in the courts for many years to come. But the academic research to date indicates that both parties will have a difficult time establishing a clear picture of the credit and debit card market, and the economics thereof."

A friend writes: "I recently received a letter from Citibank telling me they're replacing my existing Citi Diamond Preferred Rewards card with a CitiBusiness card? Among other things, they're reissuing my card with a new account number. What's this all about?"

We can only speculate about the reasons behind Citi's replacement - and our speculation is that this reissuance is all about card interchange economics. Cards classified as business cards have historically had higher interchange fees associated with them - paid to the issuer by merchants - primarily because to get issuance the card associations had to make the cards economically viable for issuers who wouldn't typically be receiving any significant revolving interest income from such cards. In today's rewards-oriented environment, higher interchange fees to the issuer are the power behind the funding of rewards programs for cardholders. So, who loses? Merchants lose -- because of the higher fees they'll be paying on those new business card transactions.

Red Herring writes about an analyst's comments today speculating that Google will unveil a new online payment service called GBuy later this month. The article says that the analyst, RBC's Jordan Rohan, believes that the service will identify those merchants who accept GBuy payments on Google's search result pages, implying higher trust and presumably driving more clickthru's to those merchants.

John Battelle blogs about an interesting analysis of eBay and Google written by Julien Decot and Steve Lee, two Haas School of Business MBAs at Cal Berkeley. In his blog post, Battelle links to the paper, titled "eBay and Google: A Coopetition Perspective". Interestingly, Battelle comments that, after graduation, the two authors are going to work in Silicon Valley - one for eBay and the other for ... Google.

Digital Transactions takes a look at adoption of alternative payment methods by ecommerce merchants - and some of the issues involved. "Of all the payment methods I had grandiose plans of implementing six months ago when Internet Retailer asked me to speak, I’ve implemented none,” said one retailer.

The Journal of Financial Transformation's September 2006 issue contains an article by Adam Levitin - an attorney in Wilmington, Delaware - titled "The Merchant-Bank Struggle for Control of Payment Systems" (PDF). His conclusion: "The ultimate outcomes of these developments are uncertain, but one thing is not: the payments industry will look very different in a decade."

Justin McElroy of The Ironton (Ohio) Tribune writes about Innovative Payment Solutions, a local independent sales organization (ISO) selling bank card acceptance services to merchants.

Barclays has announced that its Barclaycard Flexi-Rate customers are repaying credit card balances more quickly – reducing the time taken to repay and the amount of interest they pay. Flexi-Rate charges a lower interest rate to those customers who pay off a higher proportion of their balance. Customers who pay more than 10% of their monthly balance are charged an interest rate of 9.9%, those who pay more than 5% are charged 12.9%. Customers who opt to pay less than 5% (minimum 2%) are charged 16.9%.

A new research report by Mercator Advisory Group predicts that the market for biometrics will approach $7 billion By 2010, explores the market opportunities for payments-related biometric authentication and reviews the various biometric scanning technologies available.

Dayana Yochim writes for The Motley Fool how "credit fraud is like a poison gas -- nearly undetectable until after the debilitating effects have begun to take hold" - and what to do about it including outlining seven signs that your credit may be under attack.

Hill's Pet Nutrition has announced it is partnering with Bank of America to launch the PetRewards VISA credit card that pays rewards to both pet owners and veterinary health care team members. Consumers may customize their card with their pet's picture by sending in the picture by mail or submitting a digital photo online or they may choose from three existing card designs.

Asahi Shimbun reports that threee of Japan's megabanks are introducing biometric identification into their automated teller machines, but depositors are largely shunning the systems despite enhanced security. The Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp. and Mizuho Bank plan to install ATMs with biometric recognition functions at all their staffed branches by September.

Steven Oberbeck writes for The Salt Lake Tribune about a move by 98 members of Congress who asked the Federal Deposit Insurance Corp. yesterday to impose a moratorium on issuing deposit insurance for any industrial bank owned by a commercial company while Congress considers the future of industrial loan corporations. The request is the latest move by opponents of Wal-Mart's application for an ILC in Utah and for FDIC approval of that ILC.