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April 30, 2003

New York Times: Visa USA to pay retailers $2 billion and cut fees

Jennifer Bayot reports tonight in the New York Times on Visa USA's settlement of the class action lawsuit brought by retailers concerning Visa debit cards.
Under the outline of the settlement, Visa will pay $2 billion to retailers and will reduce the fees it charges merchants on some debit card purchases, according to a person close to the retailers' legal team. MasterCard, under its settlement, agreed to pay $1 billion and also agreed to cut its fees, according to the person close to the retailers. Both will pay $25 million of the settlements immediately.
The Wall St. Journal is also covering this story tonight. Visa USA's press release is available online.
"As it has in the past, the 'Honor All Cards' policy remains a core principle of the Visa payment system. By agreeing to modify the policy, Visa preserves the essential benefits and features that our system has provided to consumers and merchants for more than 35 years. With this business dispute behind us, Visa will redouble our efforts to innovate on behalf of cardholders and merchants and to vigorously compete in the marketplace. "Beginning January 2004, merchants will decide whether they want to continue to accept Visa's popular debit products. Just as it is clear today with the familiar Visa blue, white and gold logo, it will be clear in the future to consumers where they can use their Visa cards. We are confident merchants will continue to accept the popular debit card providing customers with the widest array of payment options, and we are pleased that our cardholders will continue to enjoy all the benefits and features Visa cards offer. "This agreement allows Visa to do all it can to preserve consumer choice at the checkout counter, while minimizing confusion. "Visa will now do what it does best: lead the market in developing the products and services that consumers, merchants and Member banks value. Today, more than 60 percent of U.S. consumer payments are made with cash or checks, and Visa is focused on competing vigorously to capture an even greater share of the $4.8 trillion in annual spending that now goes to cash and checks. "Visa remains the market leader in debit with more than 120 million Visa check cardholders making more than 25 million transactions a day in more than 5 million locations in the U.S."
Also tonight, counsel for the merchants in this case released their own press release announcing a press conference to be held tomorrow morning at 10 AM EDT.
"MasterCard and Visa have now agreed to settle the case with the merchants," said Lloyd Constantine of the New York firm Constantine & Partners. "The world of debit is about to change for the better, for merchants and for consumers. Five million merchants will now get relief from excess fees that were forced down their throats by MasterCard and Visa. Competition will be restored to the debit card market and off-line signature debit transaction fees will drop. Consumers will continue to have the choice to use debit cards that are competitively priced. Billions of dollars in excess costs to merchants will be eliminated during the coming years and that should mean lower prices for consumers."

April 28, 2003

WSJ: Retailers win $1 Billion accord through MasterCard settlement

Jathon Sapsford and Kara Scannell report in the Wall St. Journal on MasterCard's settlement of the merchant's debit card lawsuit.
While terms of the settlement weren't disclosed, people familiar with the matter confirmed that it involved damages of about $1 billion. It isn't clear whether the settlement will be paid completely in cash. It also leaves Visa, the other large credit-card brand jointly owned by member banks, alone to face the retailers at trial in New York federal court.

AP: MasterCard settles debit card suit

The Associated Press reported this morning that MasterCard has agreed to a last minute settlement with retailers in the debit card lawsuit scheduled to go to trial this morning.
The surprise announcement by U.S. District Judge John Gleeson left Visa USA as the only remaining defendant in the closely watched lawsuit. Gleeson gave no details of what he called the "11th-hour settlement," saying only: "The case is settled as to MasterCard." He ordered MasterCard, as well as Wal-Mart and other plaintiffs in the suit not to speak publicly about the settlement. "I don't want this jury pool tainted by that," the judge said, before he began questioning potential jurors for what was left of the suit. Opening arguments were expected later Monday in Brooklyn federal court.

April 25, 2003

Bank One Card Services Analyst Conference

Yesterday, Bank One held an analyst conference covering its Card Services group. Slides from the conference are available online.

April 24, 2003

WSJ: Retailers, Credit Card Issuers to Battle in US District Court

Jathon Sapsford and Mitchell Pacelle report on the upcoming trial in the retailers vs. the credit card associations lawsuit.
While victory for the retailers is by no means assured -- and any judgment for the retailers could be held up for years on appeal -- Wall Street analysts already are beginning to handicap the exposure of the banking industry. "The key issues for banks revolve around their potential exposure to financial penalties and the extent to which lost fee revenue could impact earnings," said John McDonald, an analyst with UBS Warburg following the case. Mr. McDonald added that the potential impact of lost fee revenues could cut earnings at the top card-issuing banks -- including Bank of America Corp., Wells Fargo & Co. and Wachovia Inc. -- by 1% to 2%.

April 18, 2003

Business Week: First Data and Concord: A power marriage

Olga Kharif reports on FDC's plan to merge with Concord EFS.
Here's what makes the proposition so potentially attractive: Most debit- and credit-card transactions today can be completed only by using Visa and MasterCard networks, regardless of what type or brand of credit, bank, charge, or debit card is used. First Data and Concord might be able to authenticate a credit card at a store, for example, or verify that the purchaser has sufficient funds in his account to make a purchase, but they often need Visa's help to get the money transferred from the customer's bank account into the merchant's. But Concord's national client base of some 6,500 banks and the companies' combined nationwide network through which to route transactions could give First Data the ability to accept and issue debit and credit cards, and complete nearly all transactions without help from Visa or MasterCard.

April 17, 2003

Visa USA holds conference call on Wal-Mart litigation

Visa USA General Counsel Paul Allen held a Conference Call yesterday to discuss the Wal-Mart litigation which is scheduled to begin trial later this month.

April 15, 2003

New York Times: Using software, not devices, to fight piracy

John Markoff reports on Cryptography Research's recent paper recommending a software approach to fighting digital piracy.
Cryptography Research's proposal would shift the location of copy-protection code from the consumer products that play music and movies and run software to the content files produced by entertainment companies and software developers.

April 13, 2003

Denver Post: First Data pursues Concord cautiously

Aldo Svaldi reports on First Data's approach to merging with Concord EFS.
First Data has followed a more sober approach to buyouts ever since struggling through the 1995 merger with Atlanta-based First Financial Management Corp., the parent of Western Union. "We stopped reading our own press clippings and decided we weren't the best operating company," Fote told a Denver audience at the Rocky Mountain Corporate Growth Conference on Thursday.

April 11, 2003

Glenbrook: I can prove who I am

My partner Carol Coye Benson shares her opinions re: identity theft -- and how the future may not be so bleak.

April 09, 2003

ComputerWorld: Fidelity looks at biometrics to ID clients, employees

Juan Carlos Perez reports on Fidelity's biometric efforts.
About three years ago, Fidelity's top management decided it was time the company explored biometrics and how it could benefit from the use of these technologies. Since then, Boston-based Fidelity has taken some decisive steps toward implementing biometrics tools and learned quite a bit about the challenges associated with the field, according to Sheldon Watson, a senior systems analyst at Fidelity who chairs the company's biometrics steering committee.

April 08, 2003

Reuters: Court rules Visa, MasterCard hid fees

Reuters reports on California Superior Court Judge Ronald Sabraw's decision today ordering MasterCard and Visa to pay millions in refunds to customers after failing to properly disclose currency conversion fees. Both MasterCard and Visa said they would appeal the decision.

RFID Journal: RFID smart cards gain ground

RFID Journal reports on the use of RFID tokens for payments.
Michael Madden, VP of e-business development for Mastercard International, said that using a contactless smart card could reduce the average transaction by 15 seconds. And since customers don't have to figure out how to swipe a card through a reader, the shopping experience is more satisfying.

TSYS, PAR3 Give Consumers Faster Warnings of Card Fraud

TSYS has announced TSYS Notification, a new service which alerts cardholders of suspicious transactions.
Here's how it works: After TSYS gauges a transaction's veracity with its TSYS CardGuard® fraud detection system, TSYS Notification immediately sends a detailed, automated phone message that requests the customer to verify the transaction (e-mail notification will be added later). TSYS Notification then offers the customer several sophisticated response options: the customer could confirm the purchase, forward the information to other users on the account or connect to a CSR to discuss the transaction in more detail. The customer's responses are immediately updated in the processing system, which ensures that service personnel are fully prepared to meet the customer's needs before receiving the call.

April 07, 2003

Alliance Data Systems plans secondary offering

Alliance Data Systems has announced plans for a secondary offering. The S-3 filed by ADS with the SEC is available online.

NTT DoCoMo, Visa in mobile payments trial

PMN reports on a new mobile payments trial in Japan involving NTT DoCoMo, Visa, Nippon Shinpan, OMC Card and AEON Credit.
The service uses an i-Appli Java application and the IR port of DoCoMo's 504i series handsets. Users enter their credit card details into the i-Appli application and can then use the handset to transmit payment via IR to specially-equipped retail terminals. The trial will involve about 3000 users, selected by Nippon Shinpan from its existing Visa customers, and 500 retailers in the Tokyo area. Visa is supplying technical expertise and implementation of its 'Visa Proximity Payments Messaging Specification'.

GE Investor Day

GE held an investor day last week focused on commercial and consumer finance. Of particular interest is the presentation on GE's global consumer finance business. In the US, GE has about 100 million consumer relationships through its private label card business. GE claims that merchants benefit greatly from private label cards -- visiting 50% more frequently and spending 30% more per visit. In addition, merchants save money when private label cards are used as they are less expensive than traditional bankcards. GE also discussed its plans for dual use cards -- combining private label and bankcard together in a single piece of plastic (similar to cards issued today by Sears and Target). GE is planning to launch dual use cards later this year.

April 06, 2003

Minneapolis Star-Tribune: Target defends growth of its credit card operations

Eric Wieffering and Melissa Levy report on Target's credit card operations.
"The sole reason we're in the credit-card business is to give our guests a reason to visit the store more often and spend more on each visit," Douglas Scovanner, Target's executive vice president and chief financial officer, said in a recent interview. But the growth in Target's $6 billion credit portfolio, and the Minneapolis-based company's ability to manage risk at a time of rising joblessness and personal bankruptcies has given some analysts pause.

April 04, 2003

New York Times: South Korea moves to rescue its 9 credit card companies

Don Kirk reports on the efforts now underway to rescue the Korean credit card companies from bankruptcy.
With more than $10 billion in debts falling due over the next three months, however, officials believed they had no choice but to compel banks, insurance companies and securities firms to join in the program for guaranteeing the viability of bonds issued by the credit card companies. They are to step into the breach created by the inability of investment trust companies to trade credit card company bonds after it was learned that SK Global, the trading arm of the SK Group, South Korea's third-largest conglomerate, covered up $1.2 billion in debt.

April 03, 2003

Visa International: Global sales volume up 15 percent in 2002

Visa International announced today that global sales volume increased 15 percent in 2002 to US$2.476 trillion.
"Today's growth is being driven primarily by debit, as consumers choose the security, reliability, and convenience of electronic payments for their everyday purchases. Visa's future growth will come from an increasing array of payment methods that allow anytime, anywhere, any way commerce," said Williamson. "Today's consumers have more choice than ever when making a decision at the checkout line. Working with our member banks, we aim to empower consumers with the option to pay now, pay later, or pre-pay."

April 02, 2003

WSJ: Lawsuit against Visa, MasterCard by US retailers will proceed

Kara Scannell and John Wilke report in this morning's Wall St. Journal on yesterday's decision by Judge John Gleeson in the U.S. District Court in Brooklyn, NY. A trial in the case is scheduled to begin April 28th.
In a 16-page order, Judge John Gleeson found that "there is evidence, direct and circumstantial, from which a jury could find a conspiracy." Several points won't even go before the jury, Judge Gleeson said, finding that "no rational jury could conclude otherwise." The most important victory may have been the issue of market definition, which is pivotal to any antitrust case. The judge found that the credit and debit card markets were separate markets. The merchants allege that Visa and MasterCard used their monopoly in credit cards to enter and dominate the debit card market, by forcing retailers to take their higher-priced debit cards as a condition of accepting their credit cards.
The full text of the decision is available online (PDF).

First Data and Concord EFS to merge

First Data Corp. and Concord EFS this morning announced an agreement to merge the two companies.
"This is a significant step in developing an open and flexible electronic payments system that will foster competition to the benefit of consumers, merchants and banks," said First Data Chairman and Chief Executive Officer Charlie Fote. "Our transaction with Concord and its STAR(SM) network will enable First Data to provide its customers with more choices in products and services. Access to our combined depth and scale will give banks and merchants an unprecedented voice in the introduction of innovative payment offerings to consumers."
With respect to projecting the financial performance of the combined companies, FDC's press release said:
The transaction is expected to be neutral to First Data's earnings per share in 2004, prior to restructuring and integration charges, and accretive thereafter. The combined company expects to generate cost savings of approximately $230 million on an annualized basis by 2005.

April 01, 2003

WSJ: First Data Corp. near deal to buy Concord EFS

Robin Sidel reports in this morning's Wall St. Journal that First Data Corp. is close to a deal to acquire Concord EFS.
Boards of both companies are expected to meet Tuesday to consider a transaction, although it isn't clear that they will vote on a deal. Indeed, the two companies have been in on-again, off-again talks for some time, and a deal could still fall apart or be delayed, these people said. Discussions lost steam several weeks ago, but have intensified in recent days, they said.

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