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September 30, 2003

C2it to close

AuctionBytes is reporting this morning that Citibank's C2it is shutting down.
A CitiGroup spokesperson confirmed that the c2it online payment service will cease operations next month. c2it will close all customer accounts effective November 9, 2003, and will send remaining funds by check to customers. The site will be taken down on February 22, 2004.
A banner on the C2it website confirms the news.

September 25, 2003

BBC - Smart cards track commuters

Aaron Scullion of the BBC reports on the Oyster card, a new smart card about to be launched by Transport for London.
Each card has a unique ID number linked to the registered owner's name, which is recorded together with the location and time of the exchange every time the card is used. The data, retained for business purposes, could be released to law enforcement agencies under certain conditions.

Review of Network Economics

The June 2003 issue of the Review of Network Economics was dedicated to the economics of payments and card network schemes. The Review is "an electronic-based refereed journal that publishes papers on the economics of network industries that have the primary purpose of reviewing, surveying, or providing a fresh perspective on the existing literature." Articles included:
  • Theory of Credit Card Networks: A Survey of the Literature, by Sujit Chakravorti
  • An Economic Analysis of the Determination of Interchange Fees in Payment Card Systems, by Jean-Charles Rochet and Jean Tirole
  • An Introduction to the Economics of Payment Card Networks, by Robert M. Hunt
  • The Theory of Interchange Fees: A Synthesis of Recent Contributions, by Jean-Charles Rochet
  • Approaches to Regulating Interchange Fees in Payment Systems, by Joshua S. Gans and Stephen P. King
  • Automated Teller Machine Network Pricing - A Review of the Literature, by James J. McAndrews
  • What does it Cost to Make a Payment?, by David Humphrey, Magnus Willesson, Ted Lindblomand, and Goran Bergendahl
  • Technology Adoption and Consumer Payments: Evidence from Survey Data, by Fumiko Hayashi and Elizabeth Klee

Risks of a Computing Monoculture

A leading group of computer security scientists (Dan Geer, Rebecca Bace, Peter Gutmann, Perry Metzger, John S. Quarterman, Charles Pfleeger, and Bruce Schneier) have written a paper about the risks to society from a Microsoft-dominated computing monoculture.
Most of the world‚s computers run Microsoft‚s operating systems, thus most of the world‚s computers are vulnerable to the same viruses and worms at the same time. The only way to stop this is to avoid monoculture in computer operating systems, and for reasons just as reasonable and obvious as avoiding monoculture in farming. Microsoft exacerbates this problem via a wide range of practices that lock users to its platform. The impact on security of this lock-in is real and endangers society.

September 24, 2003

Comptroller Hawke addresses bankers

Last week Comptroller of the Currency John D. Hawke, Jr. addressed the American Bankers Association at its annual meeting in Hawaii. His comments addressed his views as to why banks were increasingly coming under legislative scrutiny. In particular, he focused on several areas he thinks may bring increased regulation on banks -- if they don't do something about it themselves: financial privacy and identity theft, predatory lending, and credit card account management practices.

September 23, 2003

WSJ - Royal Bank of Scotland's multi-brand strategy

I enjoyed reading today's front page story in the Wall St. Journal about Royal Bank of Scotland's multi-brand banking strategy.
People choose a bank for reasons for rational and irrational, says Fred Goodwin, Royal Bank's plain-spoken chief executive. "It isn't my job to tell them they made the wrong choice," he says.
Reminded me of some smaller versions of the same strategy among a couple of bank holding companies here in the US: Great Bay Bancorp here in the San Francisco Bay Area and Synovus in Alabama and Georgia.

ID Analytics releases identity fraud study results

ID Analytics today released the results of an extensive study of identity fraud.
The knowledge gained through this research, combined with new advanced technology, led to the development of ID Analytics' ID Score, which assesses the legitimacy of identity information provided by individuals at the point of application, before credit, debit or new accounts are granted. Underlying the ID Score is a pioneering pattern recognition technology called Graph Theoretic Anomaly Detection˙ (GTAD˙), which has a patent pending. GTAD dynamically detects unusual patterns based on the identity data elements on an application. Today, the ID Score is being used by some of the nation's largest credit card, retail card, wireless and online instant credit companies, daily helping to detect hundreds of frauds and saving many thousands of dollars in losses.

September 22, 2003

American Express comments on Visa/MasterCard anti-trust lawsuit

American Express today issued a press release commenting on last week's decision by the U.S. Court of Appeals affirming district court judge Barbara Jones‚ ruling in favor of the U.S. Government in its antitrust lawsuit against Visa and MasterCard.
"We believe that the September 17th ruling by the appellate court effectively ended the legal arguments on the merit of this case. Visa and MasterCard have said they plan to appeal the ruling, but we believe that represents no more than a delaying tactic. Those delays are likely to run for months, not years. Based on our assessment, Visa's and MasterCard‚s delay tactics will run their course no later than mid-2004. "In the meantime, we will be renewing our discussions with banks about establishing network partnership agreements in the U.S. There is a strong interest among banks to partner with us in the U.S. just as they have internationally. We expect to have the first of our U.S. bank agreements signed no later than the second half of 2004. "As we have said earlier, we continue to consider the possibility of bringing private legal action against the card associations. The September 17th court ruling reaffirms the viability of this course of action."

September 21, 2003

Australia - Banks up card fees again

Matthew Horan writes about fee changes being made in the Australian market by bank card issuers.
An investigation has revealed the major banks have raised fees on virtually every card in the year since the Reserve Bank announced alterations to the interchange fees. The changes to the interchange structure mean retailers and other merchants can recover the cost of accepting credit cards ˆ often around one per cent of the value of the transaction. The savings are supposed to be passed on to consumers ˆ but the banks have responded by slugging card users with higher fees, according to a survey conducted for The Sunday Telegraph by leading financial industry monitor

September 19, 2003

Australia - RBA interchange reforms upheld

MasterCard and Visa lost their appeal of the changes to interchange rates and other credit card-related provisions made last year by the Reserve Bank of Australia. An appeal is expected.

September 17, 2003

Visa, MasterCard lose anti-trust ruling

The U.S. Court of Appeals for the Second Circuit today upheld an earlier district court decision in a case brought in 1998 by the U.S. Department of Justice.
"The defendants have failed to show that the anti-competitive effects of their exclusionary rules are outweighed by pro-competitive benefits," Judge Pierre Leval wrote in the 23-page decision on behalf of a three-judge panel.
A PDF file of the Appeals Court decision is available online. Looks like the next stop for this case is the US Supreme Court.

September 12, 2003

American Antitrust Institute: FDC/Concord EFS Merger

The American Antitrust Institute earlier this week posted a background paper on the proposed First Data Corp./Concord EFS merger.

September 11, 2003

Mobile payments

Carlo Longingo reports on SimPay, the mobile payments consortium formed by Orange, Telefonica Moviles, T-Mobile and Vodafone.
A recent UK survey of 2500 Net users found that only 7% said they would sign up for this type of service, with a resounding 64% saying they wouldn't. Those are some pretty substantial numbers to turn around.

Visa USA reports mid-year check card volume grows

In a press release, Visa USA reported yesterday that payment volume on its check card products increased twenty percent in the first half of 2003 as compared to the same period in 2002. During the period, more than 133 million U.S. Visa check cardholders spent more than $134 billion. Volume on the Visa check card now represents more than a third of total Visa volume in the U.S.

Visa card volume grows in India

The Business Standard reports that sales volume on Visa cards in India grew over forty percent in the second quarter over the same quarter last year.
The acceptance infrastructure have grown in the country with banks like HDFC bank and ICICI Bank which were the new kids in the block deploying around 30,000 and 10,000 electronic data capture (EDC) terminals in the last one and half years. These terminals were deployed majorly in the smaller towns. The total number of EDC terminals in the country is now at around 70,000.

September 09, 2003

American Express gives analysts' update

American Express CFO Gary Crittenden spoke yesterday at the Lehman Brothers Financial Services Conference. His slides and talking points are available online. Of note, the presentation highlights the business model advantages that American Express claims from higher spend enabling higher merchant discount fees thereby enabling richer reward programs to cardholders.

September 08, 2003

AdAge: Key chain credit cards become the new rage

Mercedes Cardona reports in AdAge this morning on the increasing popularity of key chain-sized credit cards.

September 02, 2003

Intuit Expands Merchant Services Business Through Acquisition

Intuit announced today that it is acquiring Innovative Merchant Solutions, a Calabasas, Calif.-based provider of credit and debit card processing services for small businesses. Intuit said it is paying $116 MM to acquire the company which had net revenues in 2002 of $25 MM. READ MORE »

No errors, no progress

Maurice H. Hartigan II interviews Wells Fargo CEO Dick Kovacevich in The RMA Journal.
So while a product company concentrates on the product itself, I quickly discovered that in financial services the product is actually secondary to the way in which it‚s distributed. In financial services your product is actually service. The majority of banking products are virtually indistinguishable˜a commodity. It‚s the delivery of the product that creates differentiation, and the critical element in delivery is your people. Most brand managers who came from packaged goods didn‚t understand that it‚s the interaction of your sales and service with the customer that is critical to success, not your ability to differentiate the product.
He goes on to comment on the budget crisis in California -- citing some numbers I hadn't heard before:
During the Internet bubble, incredible tax revenues were generated in California essentially by stock options ˜ $18 billion in 2000. About 33% of California‚s revenue in 2000 was generated by 44,000 taxpayers. That‚s not a sustainable model. If we saw that in our business, we‚d be very concerned.


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