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« December 2002 | Main | February 2003 »

January 31, 2003

Edgar, Dunn: Successful Card Payment Chargeback Processing

Dave Poe looks at cost reduction opportunities in the back office operations of credit card issuers.

January 30, 2003

Gartner's vision of the global financial services industry

Gartner analyst David Furlonger shares his predictions for and visions of the future of the global financial services industry.
Today, cost-cutting takes precedence over all else. Institutions consider operational efficiency is far more important than operational effectiveness and value enhancement. Rather than take a hard look at where they want to be competitively in five years, business decision makers focus on next year‚s automation projects and blame the regulators for making life harder. The return-on-investment credo is flawed, because it is used to justify short-term returns against a few selected projects, not overall long-term growth.

January 29, 2003

CBC News: TD Bank switches to American Express

Amex Bank of Canada and TD Bank Financial Group announced an alliance in which TD will transfer commercial and corporate clients to the American Express credit card from Visa. Financial details of the deal weren't disclosed, but a spokesman for Amex indicated the arrangement is worth hundreds of millions of dollars. The move will involve about 300 corporate TD clients.

CNET: National Semiconductor's smart card vision

Michael Kanellos interviews National Semiconductor CEO Brian Halla.
What other projects is National working on? We have this vision that your smart card will have biometric information. It will have your bank account and your passport and your medical data--but only your thumbprint can activate it. So you shove it into a slot and it says, 'Yeah, this guy's passport is real. Or 'yeah, this guy's got the bank account to back this up.' Or maybe you just load it up with $50,000 and burn it off over time. But if you ever lose it, (the card) doesn't have your thumbprint so it's useless. We're working with a particular technology where you don't leave your thumbprint; you rub it. We've been working on that for around six months.

Dow Jones: Banks turn call centers into profit centers

Lynn Cowan reports on successful strategies to turn call centers into profit centers through cross-sell of products.
Turning customer service centers into effective sales offices requires the kind of detailed personal data that credit card companies excel at -- past payment histories, spending habits and information about a customer's favorite stores. "Offers are individualized by looking at information like how customers are using their cards, their demographics and recent things we have offered them," said Steve Kietz, senior vice president of marketing in J.P. Morgan Chase Bank's credit-card business, which issues cards through its Chase Manhattan Bank USA subsidiary.

January 28, 2003

The Register: Paybox scraps m-payment service

Drew Cullen reports on Paybox's withdrawal from its m-payment service.
In a statement on its Web site, Paybox says it can see "no possibility for a single mPayment provider to develop the industry alone in the current industry conditions, especially amidst the discord between the other important market players (banks and telecommunications companies). The necessary growth and profitability can only be reached with many active market players, which have so far failed to appear."
[Note: Russell Beattie pointed me to this item. Thanks Russ!]

January 26, 2003

WSJ: EU privacy authorities to seek changes in Microsoft Passport

Brandon Mitchener reports on plans by European data-protection commissioners to seek changes by Microsoft in its Passport online authentication system.
Microsoft has insisted that Passport already complies with European data-protection rules. But European privacy authorities last year said the system raised "legal issues," including the "value and quality of the consent given" by users and the "security risks associated" with the transfer of their data to Passport's partners. By law, anyone wishing to store personal data related to residents of the European Union has to ask permission and give people the right to change or delete the data at any time. Anyone storing the data is also forbidden from sharing that data with third parties without asking the consent of the data subject.

WSJ Europe: Clash over how to handle payments slowing spread of mobile e-commerce

Matthew Karnitschnig reports on how too many divergent interests may be slowing the progress of mobile e-commerce.
M-commerce is generally divided into two categories -- micropayments, or those under $10, and macropayments, more-expensive purchases that are usually made by credit card or check. There's a general consensus that telecom operators are best placed to handle micropayments by charging for the services on monthly statements. Wireless operators already do this for things like special ringer tones and logos -- symbols such as hearts or cartoon characters that one can download and send to friends. Indeed, this area alone is now worth about $1.7 billion world-wide. Operators have turned the market into a lucrative niche by charging surchages of as much as 30% for the services. But the real battle centers on control of higher-margin, macropurchases. After some resistance, mobile operators have come to accept that they lack the risk-management expertise financial institutions have in dealing with consumer credit on a large scale. There are also a host of regulatory issues that would prevent wireless firms from running payment services in many countries. Still, mobile operators are reluctant to cede the territory to credit-card companies and banks without getting a piece of the action themselves. The problem is, the low fees charged by the current array of payment options leave little room for any new payment system to recover its costs. Credit-card commissions, which generally are about 3%, already leave the likes of Visa and MasterCard with razor-thin margins. And bank commissions on debit-card transactions tend to be even lower.

Financial Times: Safeguarding credit cards in cyberspace

Ellen Kelleher reports on Verified by Visa.
The world's biggest card network has put millions of dollars towards a campaign to convince its issuers and retailers to adopt Verified by Visa - a system that requires consumers to sign up for passwords that confirm their identities with issuing banks. So far, most banks and about 6,000 retailers have agreed to take part. "The official word is that they want to reduce fraud," says Avivah Litan of the Gartner Group. "But they firmly believe that credit card usage and purchasing will go up if there is less fraud." International losses from online fraud, which reached $1.64bn over the past 12 months, almost doubled in the past two years, Gartner Group research indicates. Last year, e-sales totalled about $91bn.

Washington Post: Bank of America ATM's affected by Internet Virus

Reuters reports that Bank of America's ATM network was affected Saturday by a malicious Internet worm that affected Internet traffic worldwide.
Bank of America spokeswoman Lisa Gagnon said by phone from the company's headquarters in Charlotte, North Carolina, that many, if not a majority of the No. 3 U.S. bank's ATMs were back online and that their automated banking network would recover by late Saturday.
Why? I'll bet that a number of folks will want to understand how such an Internet outage could have affected the largest ATM network in the US.

January 22, 2003

New York Times: Some banks encourage overdrafts

Alex Berenson reports that "at least 1,000 banks are encouraging customers with low balances to overdraw their checking accounts, allowing the banks to skirt credit laws and collect billions of dollars in new fees."

January 20, 2003

BBC: Online shopping a Christmas hit

The BBC reports on a Nielsen survey that says about 60 percent of the UK online users shopped online this Christmas season.
The survey shows that buying online is now a part of everyday life for millions of people, a spokesman said. It also suggests the UK has the most web literate shoppers in Europe, with nearest rival Germany registering just over 10 million visits over the same period. Global bookselling giant Amazon topped the Nielsen chart, with Argos claiming the title of the most visited UK High Street retailer on the web for the second year running. The top ten includes the highest number of UK High Street retailers since the survey began, a Nielsen spokesman said.

January 19, 2003

Sunday Times (Australia): Credit card fees rise by up to 30 per cent

Michael Horan reports on consumer credit card fee increases in Australia.
Research by leading financial monitors infochoice.com.au for The Sunday Telegraph shows five banks, including three of the "big four", increased fees by up to 50per cent since July. It also reveals the four major banks cut credit card interest rates by as little as 0.75 per cent despite an official rate cut of two per cent. The new fees could add hundreds of dollars to the cost of simply having a credit card. Commonwealth Bank customers will now have to pay an annual fee of $59 -- up from $45 -- to use a "Classic" Visa, MasterCard or Bankcard. Gold card users will have to pay $114 -- up from $82 -- for the privilege of extra benefits including a rewards program and a higher limit.

January 17, 2003

IFX releases version 1.4 specification for public review

The Interactive Financial eXchange (IFX) Forum released for public review today the latest version of the IFX specification, Version 1.4, which incorporates new features to support ATM, POS and other financial channels.
This new version builds on IFX's multi-channel capabilities, such as enabling customers to deposit, withdraw and transfer funds, and allows financial institutions to exchange essential information with their customers, their service providers, and other financial institutions. "IFX is a well-designed specification developed by both the financial industry and its technology providers - a productive collaboration that produced an extensible and interoperable standard for all the industry to use," said IFX Forum Chairman Mark Tiggas of Wells Fargo Services Co.

January 16, 2003

Seattle Times: Washington Mutual puts growth on the fast track

Bradley Meacham reports on Washington Mutual's plans to open nearly 10 percent more branches nationwide this year.
The Seattle lender plans to open 250 branches, mostly in new markets such as Chicago and Denver, Chief Executive Kerry Killinger said yesterday at a University of Washington Business School Dean's Breakfast.

New York Times: George Waters

The New York Times highlights the contributions of George Waters to the success of American Express.
American Express hired Mr. Waters as general manager of its credit card division in 1961. At the time, credit cards were accepted primarily by restaurants, and Visa and MasterCard did not yet exist. Diners Club was the card that had the most members. Mr. Waters gave the American Express card a significant lift by persuading American Airlines to drop its credit card and begin accepting the American Express card. Other airlines soon followed. To strengthen the credit card division, Mr. Waters significantly increased its annual fee, reduced the number of delinquent accounts and improved its accounting system. Under his leadership in the 1960's and 1970's, the American Express card became a global brand and the flagship product of the American Express Company.

Boston.com: Diebold tests biometric hand geometry recognition

Diebold is testing biometric hand geometry recognition as part of its campus card system.
"WVU has partnered successfully with Diebold since 1995 with the use of the Mountaineer Card system, which allows our students to do a variety of things from purchasing meals at campus restaurants and items at the bookstore, to riding the Personal Rapid Transit System (PRT) and gaining entry to athletic contests," Hardesty said. "This innovative electronic security system for the residence hall and campus recreation center is just another example of how this company is changing the way we do things to make life more secure, convenient and accessible for our students."

January 15, 2003

Wells Fargo extends support for online statement delivery

Wells Fargo has announced that it is extending its support for online statement delivery to include eligible savings, checking, Portfolio Management Account (consumer or business) and brokerage accounts. The bank also described its "OneLook" account aggregation service as a differentiator.
"Wells Fargo's OneLook service helps customers manage financial resources across Internet sites," continued Modjtabai. "Instead of visiting multiple sites with separate sign-on procedures, customers can save time and view a consolidated financial picture of all their accounts -- even those outside of Wells Fargo. Customers now have one-stop service integrated through a single sign-on to all of Wells Fargo's banking; bill pay; mortgage; student and personal loans; home equity loans; auto loans; full-service and discount brokerage; credit card accounts as well as access to customers' personal e-mail and reward accounts." Forbes praised Wells Fargo's single sign-on service, saying that it, "allows access to all of your accounts everywhere." Leading technology analysts have said Wells Fargo's single sign-on service is the largest in terms of number of services available through a single sign-on. By integrating OneLook with its leading single sign-on service Wells Fargo is providing customers with a more seamless experience.

January 14, 2003

Card Forum: National Merchants Revisited

Charles Marc Abbey of First Annapolis reports on the economic implications for merchant bankcard acquirers supporting national merchants.
For the early 1990s, First Annapolis estimates that national merchant net spread (gross revenue less interchange and assessments divided by sales volume) averaged about 30 basis points (0.3%), which dropped to 17 basis points by mid-decade and then dropped again to 13 basis points by early this decade. (There is no good industry data, but our educated guess is that the price competition in the national market˜the decline in net spreads˜is twice the rate of the rest of the industry.) This 13-basis-point net spread compares to an average for the rest of the industry in the 55- to 65-basis-point range. So though national merchants generate over half the volume in the industry, they account for less than 20% of revenue.

FDIC: Basel and the Evolution of Capital Regulation: Moving Forward, Looking Back

The FDIC has released a paper on Basel II.
This paper, the first in an FDIC series exploring Basel II, traces the broad history of post World War II views of bank capital adequacy, and places the new accord against that historical context. Our purpose in placing the accord in historical context is to give an appreciation of how and why the current regulatory capital regime came into being, and an understanding of the changes in bank risk profiles and banking market structure that are providing the momentum for Basel II. This review also demonstrates the significant ways the proposed capital framework represents a philosophical departure from past practice.

VeriSign: Online sales soar despite worst retail season in 30 years

VeriSign announced this morning their analysis of online sales during the holiday season.
The post-holiday season analysis revealed that VeriSign merchants' total online payments transactions increased more than 75% in 2002. Overall for 2002, consumers spent nearly $13.7 billion on the Internet, according to Nielsen//NetRatings. High-volume VeriSign merchants also saw substantial increases in transactions processed. The average dollar amount per transaction for the top 50 VeriSign online merchants nearly tripled in 2002 increasing from $43.91 in December 2001 to $123.85 in December 2002.

January 13, 2003

First Data Presents Retail Merchants With Combined Processing Solutions

First Data Corp. has announced a suite of comprehensive merchant payment solutions.
First Data currently offers, directly and through its partners, multi-lane and specialty retailers, convenience stores, grocery stores and hypermarkets a breadth of services including debit, loyalty card, gift card, e-check conversion, electronic benefits transfers (EBT), fleet card, smart card and credit card processing services. First Data processes virtually any payment while leveraging the existing synergies between its services and subsidiaries, such as PayPoint, ValueLink and TeleCheck. These relationships enable First Data to launch the only comprehensive suite of point-of-sale (POS) solutions tailored to meet the specific payment requirements of retail merchants.

News.com: RFID tags - Big brother in small packages?

Declan McCullagh writes about his concerns with privacy involving RFID tags.
Don't get me wrong. RFID tags are, on the whole, a useful development and a compelling technology. They permit retailers to slim inventory levels and reduce theft, which one industry group estimates at $50 billion a year. With RFID tags providing economic efficiencies for businesses, consumers likely will end up with more choices and lower prices. Besides, wouldn't it be handy to grab a few items from store shelves and simply walk out, with the purchase automatically debited from your (hopefully secure) RFID'd credit card? The privacy threat comes when RFID tags remain active once you leave a store. That's the scenario that should raise alarms--and currently the RFID industry seems to be giving mixed signals about whether the tags will be disabled or left enabled by default.

Giant Eagle selects BillingZone for outsourced accounts payable

Supermarket retailer Giant Eagle, Inc. and BillingZone, LP today announced that Giant Eagle is utilizing BillingZone's apConnect˙ service to receive, review and pay its invoices. BillingZone, an operating company of eONE Global, is a leading provider of business-to-business (B2B) electronic invoice presentment and payment (EIPP) services and offers companies the convenience of receiving and paying their invoices through one convenient service.

Dell enters POS market

Dell announced this morning that it is entering the retail point-of-sale systems market.
We're following our retail customers' requests to bring their stores the same high performance and low cost of ownership we've already brought to their corporate office and datacenters," ssaid Joe Marengi, senior vice president, Dell Americas. "Dell's POS offering is an illustration of how Dell's direct model, which provides customers with customized products and services, works well in retail, a market that requires a seamless integration of technology, software and services across multiple locations."
CNET reports on Dell's POS announcement. More information is available on Dell's website: http://www.dell.com/retail.

Visa Canada holds conference for top online retailers

Visa Canada held a conference in Toronto this morning for top online retailers. In a press release, Visa Canada reported online sales using Visa during the 2002 holiday season increased 103 percent. Also announced were survey results indicating that consumers are still concerned about security when purchasing over the Internet -- and would welcome the increased security of a password registered with their bank tied to their account.
Retailers who want to fully take advantage of the growth of online sales and fuel future growth need to adopt new Internet technology that will increase consumer confidence and reduce fraud," Internet authority Jim Carroll told the conference. "Systems like Verified by Visa(C) will make merchants more competitive and help them unlock the 85 percent of Canadian credit card holders who are avoiding holiday Internet shopping, many because of security concerns." "While holiday online sales showed a solid increase," Carroll said, "we cannot take for granted year-to-year growth without a breakthrough in online security; Verified by Visa(C) is that breakthrough and 2003 is the year."

Simon gift card sales soar

Simon Property Group announced this morning that sales of its new gift cards in 47 trial malls were up 30 per cent over gift certificate sales in 2001 during the month of December.
Simon partnered with Visa to pioneer the Simon Gift Card as part of its commitment to provide shoppers with new innovative products and offerings that further enhance the shopping experience. The new gift cards provide customers with the convenience of a payment card that utilizes the Visa processing network and is used with the ease of a check card. Shoppers can use the Simon Gift Card, a prepaid card, anywhere Visa is accepted, like the many stores and restaurants within Simon malls nationwide.

January 11, 2003

Sify: Sam Pitroda to develop e-money for India

WorldTel Chief Sam Pitroda today said he will soon help enable Indians to use their mobile sim-cards as credit cards. In an informal chat with Minister of State for communication and IT, Sumitra Mahajan, the WorldTel chief said the various MTNL and BSNL outlets can be used as hubs for the total financial activities.

January 10, 2003

Kansas City Star: MasterCard relocating back-up processing center from New York to KC

Kevin Collison reports on MasterCard's move of its backup processing center from New York to Kansas City.
Artie Ahrens, senior vice president of computer and network services for MasterCard, said the facility will serve as a backup for the company's main processing center in St. Louis. "What we've always been concerned about was the distance from St. Louis to the Long Island backup site," Ahrens said. "The Sept. 11 event showed us if we had to get there, it would have been difficult." MasterCard officials decided they wanted to build a new backup center within a four- to six-hour drive of St. Louis.

Washington Post: Credit card firms face tighter rules

Albert Crenshaw reports on tighter standards issued by Federal banking regulators on Wednesday including new guidelines on minimum payments.
"We saw slippage in banking practice," and the new standards are meant to "kind of pull it back into more the middle of the road," said Barbara Grunkemeyer, acting deputy comptroller of the currency for credit risk.
The press release and guidelines document are available on the Federal Reserve web site.

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