Christian Berthelsen reports that the California Assembly may not bring the Financial Information Privacy Act up for a vote before the end of the legislative session midnight Saturday. A group called Californians for Privacy Now has been formed to place an initiative on the ballot in the event the legislature fails to act. Craig Newmark of craigslist.org also speaks out on the issue.

Like Mr. Ed, I never speak, unless I have something to say ... and I happen to know a few things about forthcoming financial privacy legislation, so here goes.

Deborah Lohse reports on Wal-Mart's plan to buy Franklin Bank of California. Legislation is pending in California to prevent the purchase.

But opponents fear Wal-Mart wants Franklin as a toehold to build a network of branches offering personal and business loans nationwide -- wiping out small lenders the way some gripe it has underpriced groceries, pharmacies and other small competitors in many local areas. Others fear Wal-Mart could use its future banking clout to deny loans to would-be competitors, coerce consumers to use only its own credit cards, or share private consumer data with its new financial-services arm.

Phil Windley, CIO of the State of Utah, provides an insider's view of credit card fees for government services.

The biggest challenge we face is that most of the revenue collected through fees is already appropriated, so an agency like the Tax Commission isn't free to use some of the oney they collect for licensing a vehicle to pay the credit card company. They have to get that money somewhere else. The somewhere else is a special "online fee."

Meredien Research is out with a new report on Visa's 3D Secure.

Visa‚s 3D Secure is the latest protocol for online cardholder authentication, and it is one that has a great chance of success. Marketed globally under the Verified by Visa brand, this protocol and concurrent rule changes by both Visa and MasterCard are the right approach to battle online card fraud. If successful, 3D Secure will effectively bar the introduction of alternative payment mechanisms to settle traditional online shopping transactions. This report examines the genesis of 3D Secure, how success will be measured, the impact on participants, how adoption patterns will differ globally, and how online shopping will be impacted. Predictions of future chargeback rates and online shopping growth are included.

Trintech is out today with its quarterly earnings report.

Revenue for the second quarter, FY 2003 was $10.9 million compared with $18.4 million for the corresponding quarter of the previous year. This was a decrease of 41%. The first half fiscal year decrease in revenue over the prior year resulted from the ongoing fragile state of the global economy. This resulted in slower payment infrastructure investment decisions that lead to a weak demand for Trintech's secure payment infrastructure solutions.

David Breitkopf reports on yesterday's announcement of credit card reforms by the Reserve Bank of Australia.   » Continue Reading

Margaret Kane reports on the use of Amazon's OneClick "wallet" across multiple stores.

In allowing customers using the same account to shop at multiple stores, Amazon has in effect created an e-commerce wallet. It's something companies from Microsoft to America Online to Yahoo have tried to do--with little success so far. But Amazon and technology providers are coming at the wallet game from two different points. Companies such as Microsoft are building the technology and hoping consumers will come. Amazon is counting on its huge customer base being attracted to its wallet feature, and it is using that popularity to pitch partnerships with key retailers.

Dan Gillmor comments on the Financial Services Privacy Coalition.

Don't fall for this.

The Reserve Bank of Australia has released its final reforms to credit card schemes in Australia.   » Continue Reading

Steve Bills reports on American Express' view of the Liberty Alliance efforts.

"We hope the Liberty Alliance will help solve the religious war," Mr. Salow said. The alliance - which also includes Bank of America Corp., Citigroup Inc., and a range of nonfinancial companies - is promoting a standard for online identity that he said could untangle today's confusing system of multiple log-ins and passwords.

Adam Engst reports on week one of PayBITS, a new honor-system payment approach to compensating authors for digital content.

Software security widely used for Internet banking and e-commerce can be easily circumvented, and customer accounts at several of Sweden's largest banks remain at risk as a result, a computer expert said Monday.

An article by Chris Stefanadis of the New York Federal Reserve Bank on why adoption of EBPP has been slow.

Although checks are still the primary instrument for bill payment in the United States, EBPP providers appear confident that they will become important players in the financial services sector. Their optimism stems from the significant efficiencies that the new technology can potentially provide: better communication links between the biller and the customer, lower processing costs, and greater convenience. Nevertheless, the spread of EBPP has been very slow, falling far short of initial projections. One key reason is the lack of coordination among potential participants.

This bill, SB-773, which was introduced by Jackie Speier, D-San Francisco/San Mateo, intends to provide significant new protections to consumers regarding the sharing of personal financial information by financial institutions. It moved out of committee today and is now headed for a vote in the full Assembly.

Representatives of financial institutions told the committee Friday that Speier's bill is unworkable, expensive and would be too confusing for customers. Privacy advocates said it would give consumers a choice in how detailed financial information is shared among companies. Speier said the bill's main issue concerned private property rights and asked "what is more precious private property than our financial DNA?"

With this ordinance, San Mateo County has become the first jurisdiction in California to provide consumers privacy protections in excess of those found in federal law, Gramm-Leach-Bliley Act. This ordinance would require financial institutions to ask for and receive consumer's permission before disclosing consumer's confidential information to third parties. "The Board, with its unanimous vote, has signaled its commitment to protecting the interests of consumers. Requiring financial institutions to get permission before sharing confidential consumer information is the only meaningful way to truly gauge a consumer's wishes," said Supervisor Mike Nevin, author of the privacy ordinance. "Placing the responsibility on consumers to stop the selling of their information defies common sense."

The ePayments Systems Observatory maintains an epayments database focused primarily around epayments in Europe.

The ePSO project is part of the European efforts to leverage payment systems innovation in the move towards promoting e-commerce in Europe. Its objectives are:

• to monitor and analyze the strategic views of market players and experts
• to strengthen communication across groups of actors, sectors, channels and countries, with a view to assist standardization and regulatory bodies to keep pace with the evolution of technology.

The ePSO project is co-financed by the European Commission DG Enterprise ISIS Programme and the IPTS. It is supported by the European Parliament and European Commission Services involved in payments.

Celent has published a new report on the market opportunity associated with global money transfers.

The global remittance market represents an increasingly attractive opportunity, driven by rising immigration and the huge pressures faced by informal networks, such as the Hawala/Hundi in the US and abroad, in the context of the war on terrorism. The remittance market should grow from US$143bn in 2002 to US$177bn by 2006, while informal networks‚ market share in developing countries should fall from 45% in 2001 to 34% by 2006, with the windfall going to official transmitters such as Western Union.

Interestingly, ecommerce as a percentage of total sales, reportedly shrunk -- although the numbers are so small that any conclusion is probably wrong:

E-commerce sales in the second quarter of 2002 accounted for 1.2 percent of total sales, while in the second quarter of 2001 e-commerce sales were 1.0 percent of total sales. In the first quarter of 2002 e-commerce sales were 1.3 percent of total sales.

Just discovered the Basel II Weblog. Too bad (for me anyway) that it's in German!

CNET reports that PayPal will no longer allow residents of New York State to use its online payment service for gambling.

Under the agreement, announced Wednesday, PayPal will stop processing payments from New York customers to Internet casino Web sites as of Sept. 1. PayPal will also pay $200,000 in disgorged profits, costs of investigation and penalties, the attorney general's office said. New Yorkers make up about 1.1 million of PayPal's 17.8 million member accounts, according to the agreement.

A couple of years ago, wireless banking was hot. Companies went public on the basis of being able to provide wireless banking services and software to banks. Guess what -- nobody wanted it.

The service, which debuted last year and lets customers make transactions from cell phones and PDAs (personal digital assistants), had just 2,500 active customers, company spokeswoman Wendy Grover said. "When wireless first became available, people may have been overly optimistic about adoption rates," Grover said.

With this morning's press release, it looks like the acquisition of PayPal by eBay is moving ahead.

The Federal Reserve has published an updated paper on the use of checks and other noncash payment instruments in the United States.

Taken together, the data show that an estimated 32.8 billion checks were paid in the United States in 1979, 49.5 billion in 1995, and 42.5 billion in 2000 (chart 1). The exact year in which check use peaked is unknown, but it appears that the number paid began to decline sometime in the mid-1990s. By 2000, retail electronic payments had gained considerable ground. Nonetheless, checks remained the pre-dominant type of retail noncash payment. Checks also continued to account for a large proportion of the total value of retail noncash payments in 2000, though the real value of total checks paid had declined since 1979.

Stefanie Olson reports that Yahoo has removed some fees from its PayDirect person-to-person payment service.

In the last week, Yahoo split PayDirect to give customers two options. One, a free account, is designed for family and friends who want to exchange money online without using credit cards. (Previously, Yahoo charged all subscribers, even if they didn't use a credit card.) The "professional" service racks up fees from the customer who accepts credit card payments--a common practice for online auctioneers. Yahoo charges 30 cents plus 2.5 percent of the cost of each transaction made using the service.

Major processing companies typically decline to reveal figures on how much money is lost to fraud in Russia, citing security concerns. Estimates of fraud amounts vary from 1 cent for every $100 up to 1 percent of all card transactions in Russia.

MasterCard has announced its growth figures for the second quarter, 2002.

"The first half of 2002 was an historic time for MasterCard, as we completed our integration with Europay International and our conversion to a unified, shareholder-owned global payments company," said Robert W. Selander, MasterCard's President and CEO. "The strong growth we are announcing today clearly demonstrates that even in a weak global economy, our members and their customers are increasingly turning to MasterCard as their payment brand of choice." "Moving forward, we expect that the new global MasterCard organization will provide even greater business-building opportunities to the industry by delivering creative, high-quality and reliable payments solutions to customers, whether they operate in one country, on one continent, or in markets around the world," he said.

CW360 reports that the Edy electronic money system created by BitWallet, a 25-member consortium headed by Sony and NTT DoCoMo, is to be adopted by seven of Japan's major banks and credit card companies for use with their credit cards.

The Edy system, which is based on Sony's Felica contactless integrated circuit card, does not require the card to be inserted into a special reader. The system can be activated for money debits when the card is placed within 10 centimetres of an Edy sensor. As money is stored on the card beforehand, the payment process takes 0.2 seconds to complete. The in-store terminal communicates with the Edy data centre once or twice a day to reconcile transactions and to check for fraud.

Today, around 200,000 Edy cards have been issued. At least one quarter of these double as corporate ID cards for Sony, Bank of Tokyo Mitsubishi and Sanden workers while around half have been bundled with Sony's Vaio W desktop personal computer. Transaction volumes are small. Each of the 100 stores currently online handles an average of around 1,000 Edy transactions per month but Yamada is confident the system will see around a 100-fold increase in transaction volume once AM/PM begins accepting the cards.

A front page story in this morning's Wall St. Journal reports on how regulators are cracking down on credit card lenders out of concerns that they have over-expanded their lending to more risky, sub-prime customers.

An effort to slow the growth of credit-card lending to high-risk consumers, while healthy for the economy in the long run, could damp consumer spending at a difficult time. Consumer spending has propped up the U.S. economy during its recent slowdown but has been accompanied by a rise in personal debt. In the last several weeks, makers and retailers of goods such as furniture and consumer electronics, along with consumer-entertainment venues such as amusement parks, have reported lower sales tied to worries about the economy and the stock market.

Line56 reports on MasterCard's SmartLink and SmartData Online initiatives.

IBM Corp. and German software vendor Paybox.net AG will combine their efforts to offer customers the ability to make secure payments from wireless devices, the companies announced Thursday.

Virgil Larson reports on the problems Transaction Systems Architects is facing because of delays in completing an audit as a result of questions about a possible financial restatement.

Eric Savitz reports on Concord EFS in this week's Barrons.

The combined effects of the hedge-fund incident, the SEC rumors and slightly messy accounting in the latest quarter have taken their toll. The result, though, is an opportunity to buy a highly profitable, fast-growing company at a relatively low price. Concord should earn a little over $400 million this year, or about 75 cents a share, on revenues of $2.2 billion. For 2003, the Street is figuring on roughly 25% earnings growth, to about $500 million, or 95 cents a share. Labry says he's "comfortable" both with the current range of Street estimates and with the notion that the company can keep growing at 25% a year for the foreseeable future. With the stock a shade under 20, you're paying about 20 times 2003 earnings -- not bad for a company growing that fast.

Gail Hoffman gave a presentation to the Electronic Commerce course at the Zicklin School of Business, Baruch College, City University of New York, last March which describes in wonderful detail the evolution and reality of e-payments. Gail was, for many years, with Citibank in New York. The full course material for Prof. Koufaris' Electronic Commerce course is also available here.

eWeek reports on CyberSource's new C# interface.

Matt Richtel reports that the accomplices who enable identity theft may be their own financial institutions.

What is less obvious is one of the report's central conclusions: that financial institutions are contributing to the theft by failing to take obvious steps to prevent it. "The majority of credit card fraud is the result of financial institutions' leniency in the account-opening process," according to the report. It said thieves used victims' identities to open fraudulent accounts and then used those accounts, for example, to launder money.

Kate Murphy reports in Monday's New York Times on the conversion retailers face in going from 12-digit to 13-digit bar codes.

Starting Jan. 1, 2005, the 12-digit bar codes retailers use to identify everything from cars to candy bars will go to 13 digits. The additional number (and associated bars and spaces) is enough to make checkout scanners seize up and make computers crash, perhaps disrupting entire supply chains. But many retailers have yet to focus on a problem that will require significant investments in time and capital.

First Data First Data Corp. (FDC-NYSE) By JMP Securities (31.85, August 6, 2002) We are downgrading our rating on shares of First Data to Market Perform from Market Outperform, as we continue to accumulate data that suggest the quality of First Data's earnings is deteriorating in every segment. The deterioration is due to a combination of increased competition, stepped-up pricing pressures, an over-reliance on acquisitions, and questionable acquisition prices being paid by the company.

Tim McHugh, Senior Research Analyst at the Chicago Federal Reserve Bank, writes about the growth of person-to-person (P2P) electronic payments. An excellent review of how this segment emerged and some of the issues for the future. Tim's got several other interesting papers and works in progress listed on his personal page.

Extended Systems has announced the availability of XTNDAccess IrFM SDK.

This SDK (software dev kit) provides mobile device developers with the source code, application programmer interfaces (APIs), sample applications, and documentation to implement the IrFM Point and Pay Profile. Infrared for Financial Messaging (IrFM) specifies a standard way to make payments using infrared connections for proximity payments. In February 2002, IrDA's IrFM working group released the initial draft of the IrFM Point and Pay Profile for public review. The Point and Pay profile leverages existing financial instruments and defines the roles of the client device and the point-of-sale (POS) terminal. Additionally, it utilizes the Object Exchange (OBEX) protocol for exchanging transaction data.

Microsoft has posted a Q&A with Brad Smith, Senior Vice President and General Counsel and Brian Arbogast, the Microsoft corporate VP responsible for Passport. Looking back, Passport has been one of the bigger debacles for Microsoft. The over-reaching ".NET My Services" (or Hailstorm) plan built on Passport provoked a widespread industry backlash which led to the opening that Sun Microsystems saw in leading the creation of a new industry group, the Liberty Alliance. Now, in a settlement with the FTC, Microsoft agrees to deal with its other claims regarding the security and privacy of Passport and user data with a 20 year oversight. Microsoft CEO Steve Ballmer said last week that he expected his team to live up to a higher standard in terms of corporate behavior. Let's hope the whole Passport episode was from that earlier era and that, going forward, Microsoft will be more thoughtful about both its claims and aspirations with respect to user identity, authentication, security and privacy. Dan Gillmor also comments:

Once again, Microsoft is found not to be telling the truth about serious issues. And, once again, the governmental agency with the power to do something realistic fades away on contact. The FTC hasn't even issued a slap on the wrist here. It merely got Microsoft to agree not to do it again.

Microsoft and the FTC announced today that Microsoft has agreed to settle FTC charges related to "the privacy and security of personal information collected from consumers through its "Passport" web services."

According to the Commission's complaint, Microsoft falsely represented that:

• It employs reasonable and appropriate measures under the circumstances to maintain and protect the privacy and confidentiality of consumers' personal information collected through its Passport and Passport Wallet services, including credit card numbers and billing information stored in Passport Wallet;
• Purchases made with Passport Wallet are generally safer or more secure than purchases made at the same site without Passport Wallet when, in fact, most consumers received identical security at those sites regardless of whether they used Passport Wallet to complete their transactions;
• Passport did not collect any personally identifiable information other than that described in its privacy policy when, in fact, Passport collected and held, for a limited time, a personally identifiable sign-in history for each user; and
• The Kids Passport program provided parents control over what information participating Web sites could collect from their children.

Microsoft‚s top lawyer, Brad Smith, said the agreement "puts specific processes in place to assure our customers that we are meeting a high bar for security and privacy protection." "We wish we had held ourselves to an even higher bar," Smith said, adding that, "We accept responsibility for the past and will focus on living up to this high level of responsibility in the future."

Visa DPS has announced that it is now processing a billion transactions every 60 days.

Since 1996, Visa DPS has been an industry leader in providing electronic banking payment products and services for the financial services industry. The financial institutions that partner with Visa DPS are able to combine all ATM and point-of-sale processing with a single provider. Visa DPS is integrated with Visa's global product development resources, and provides processing support for Visa's newest product initiatives, including Verified by Visa, Host-Based Stored Value products, and the Visa POS Check Service. Visa DPS provides a support infrastructure unmatched in the marketplace, and has become the largest volume check card processor in the U.S., providing support for over 43 million check cards.

PayPal and its prospective owner, eBay, are under new scrutiny from federal regulators. PayPal received two federal grand jury subpoenas last month concerning its processing of online gambling transactions, in addition to requests from federal regulators regarding the proposed merger with eBay, according to regulatory filings.

From Japan...

NTT DoCoMo, Inc. and its eight regional subsidiaries announced today that DoCoMo, in tie-ups with eight credit card companies, will introduce the "DoCoMo Card," a new credit card that will be available nationwide from August 19.

Robyn Greenspan reports on getting a credit card merchant account and mentions MerchantSeek, a free service for researching different providers

Anh-Thu Phan reports on banks as authentication and identity providers.

Thomas Power reports on BT's new micropayments service -- launching in September.

You can subscribe to a new subscription mailing list focused on financial cryptography topics.

Robert Stein comments on ActiveWin re: Microsoft's plans for .NET Passport Express.

During a game, CellBucks customers refer to a printed menu and call a toll-free number, punching in codes for the desired goods, as well as their seat locations. After running a quick credit check, the CellBucks system places the order. Customers pay no additional fee, beyond the usual amounts charged at stadiums; the company takes a percentage of the purchase price.

Ross Snel reports on iPIN's plans for equipping cars with transponders for use in payments.

Here's how iPIN's system might work: You pull up to a drive-through window at a fast-food restaurant and order a meal. Instead of grabbing your wallet, though, you sit back while the restaurant's electronic scanner bounces a radio-frequency signal to a chip embedded deep inside your car. The chip identifies you and your payment account. After the cashier receives an electronic message verifying that you have enough money in your account for your burger, fries and shake, he hands over your food and you drive away.