Christina Sessions reports on Alaskans rapid adoption of online bill paying services.

Alaskans appear to be ahead of the curve when it comes to using online bill payment. Debbie Sakamoto, public relations officer for Key Bank in Portland, Ore., said Alaskans led the national average for bill pay usage by 22 percent.

eOne Global announced this morning that it is acquiring BillingZone from PNC Bank and Perot Systems.

According to Raj Kushwaha, managing director and CTO of eONE Global, "The planned combination of BillingZone's services and First Data's existing paper document and check handling capabilities would create the most comprehensive offering available to large companies for automating both paper and electronic financial supply chain transactions. First Data is a leader in e-commerce and payment services - its existing infrastructure routes and settles billions of transactions every year." "The BillingZone acquisition brings together the market leading customers and channels of BillingZone with the scale and processing infrastructure of our parent company, First Data," Kushwaha added.

Washington Mutual announced late last week that it had entered into an agreement with Unisys to capture check images in its financial center stores (branches).

Making this move now positions Washington Mutual to confront such industry issues as:

• escalating unit costs of processing paper checks;
• the shift to electronic transactions such as electronic bill presentation and payment;
• and the impact of the Check Clearing for the 21st Century Act, pending legislation to enhance the efficiency of the check system by allowing digital images in truncation, which can eliminate the need for a paper trail in check processing.

The FDIC released its latest economic outlook. Included is a look at the risks of deflation.

Clearly, deflation would have significant adverse effects on the banking industry, depending on its severity and duration. Past episodes of asset and goods price deflation often coincided with banking crises, particularly when the banking sector was already in a weakened financial position. Given the current income and balance sheet strength of the U.S. banking industry, short and mild deflation is likely to have a limited adverse impact. However, prolonged deflation would present more serious challenges to the industry by eroding the collateral value of assets and increasing the real debt burden of borrowers. Deflation could also lead to a decline in nominal income for households and businesses, reducing their ability to repay outstanding debts. In combination, these developments likely would lead to significant credit quality deterioration, while an increase in real interest rates would weaken loan demand. Despite these dangers, there are good reasons to think that serious deflation is unlikely to occur in the United States. One reason is a well-capitalized banking sector with relatively low levels of nonperforming loans. Another is the fact that policymakers appear to be alert to the dangers of deflation and determined to take steps to prevent it from taking hold. Finally, it appears that modern financial instruments and risk management tools contribute to the financial flexibility of households and businesses, reducing the potential for a widespread liquidity crisis. One example is the use of credit derivatives by commercial lenders to off-load credit risk. Another is the benefits of loan prepayment options that allow households and businesses to reduce their interest expenses by refinancing at lower interest rates. Together, these factors limit the possibility of a prolonged deflation that could seriously harm the banking industry.

A report on how its becoming difficult to find new concepts for affinity and co-branded credit cards.

Last year, card issuers mailed out 5.1 billion offers, but consumers responded to only 0.6 percent of the letters. Competition for new customers has intensified as the industry has consolidated; the top five banks hold more than half of the $635 billion in outstanding loans. The competition and lower interest rates also pressure issuers' profit margins, and banks are battling higher credit losses from record bankruptcies. That's where affinity and co-branded credit cards have helped. Such cards are designed to give consumers an incentive beyond low interest rates and fees to get and use new cards. Banks like such programs because consumers who use an affinity or co-branded card spend at least 30 percent more on it than on a regular classic, gold or platinum card. They are also more likely to pay off their bills.

A report on the increasing acceptance of credit and debit cards by quick service restaurants.

The quick-service industry, which includes restaurants that sell hamburgers, chicken, sandwiches, pizza, doughnuts, ice cream, yogurt, tacos and other prepared food items, reported sales of $113.5 billion in 2001, according to Morgan Keegan & Co, an investment firm in Memphis, Tenn. But only 2.8 percent to 3 percent of quick-service businesses report any card-based transactions, according to a Visa study released last month. That compares with 35 percent to 40 percent card use by consumers in other industries. Credit-card issuers and transaction service operators are pushing fast-food chains to accept plastic because doing so is expected to boost sales to higher levels. Fast-food chains also would have less cash to manage and keep on site, thereby reducing the chance for error and theft, experts said. The Visa study found that consumers spend 30 percent to 50 percent more when they use credit cards rather than cash.