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« June 1, 2003 - June 7, 2003 | Main | June 15, 2003 - June 21, 2003 »

June 13, 2003

Britain's revolution at the retail POS

The UK is in the midst of a massive upgrade of its card payments infrastructure from magnetic stripe based signature cards to smart cards authenticated using PIN's. Richard Rolfe reports on this change.
The main reason for the change is the dramatic rise in card fraud. Fraud levels are estimated to have tripled in just six years, according to the London-based Association for Payment Clearing Services (APACS), the British banking industry trade group (chart, page 24). And some observers believe they could nearly double again in about three years. Experts attribute the higher losses to more Internet fraud, application fraud, and counterfeiting.
As the article points out, rule changes provide the economic incentive for merchants to upgrade their POS terminals. A 10-basis point reduction in card acceptance fees coupled with a shift in responsibility for liability to merchants in the event back-level POS acceptance devices are used both provide the business case for merchant adoption.

Fraud control tug of war

Linda Punch reports on how frustrated online merchants are coming together to attempt to develop their own solutions to online fraud.
It‚s understandable why Web merchants are looking for relief. A 2002 Gartner Inc. survey found that fraudulent transactions comprise 1% of total online transactions, 15 times higher than fraud in the physical world. Online retail sales increased 27% to $45.6 billion last year, according to the U.S. Census Bureau. And an e-merchant‚s losses can extend beyond the actual cost of the product or service charged to a fraudulent card. Because they operate in a card-not-present environment, e-merchants also are subject to the card associations‚ highest interchange rates, the portion of each transaction paid by acquirers to issuers in return for guaranteed payment. Visa‚s interchange rate for e-commerce is 1.80% of the sale plus 10 cents. That compares with Visa‚s card-present retail rate of 1.39% plus 10 cents. Under MasterCard‚s interchange rates, Internet merchants pay 1.90% plus 10 cents, compared with 1.40% plus 10 cents for card-present retail transactions.

June 12, 2003

First Data holds international investor day in London

First Data Corp. held an investor day on its international business yesterday in London. The company presentation is available online (5 MB - PPT format).

Make your identity useless to thieves

David Simons reports in about a little known feature offered by the three major credit bureaus.
The three major credit reporting bureaus--Equifax, Experian and Trans Union -- allow you to place on your credit files a notice telling prospective creditors to confirm with you by phone applications for new credit made in your name. You'll know immediately if there's been identity theft; and imposters will likely move on to easier targets. The credit reporting bureaus don't make clear that you don't have to actually be a victim to have an alert added to your file at no charge. The alert is only for verifying new applications; not using existing credit.

June 11, 2003

Fraudsters hit US retailer

The Guardian reports that a US retailer has had a number of credit card details compromised.
Visa yesterday said it was cooperating with the American authorities on the matter. It also said it had issued a fraud alert to its member banks after it was informed of an "internal security breach" at the American retailer's database.

Mobile credit card authentication reports that Arcot Systems and Diversinet have agreed to develop and co-market systems for mobile authentication of online credit card transactions.
Under the terms of the agreement, Diversinet will integrate its Passport SMS Messenger product into Arcot's TransFort e-payments authentication product suite, thereby extending the TransFort platform further in terms of support for SMS wireless access. The combined solution will provide banks and other card Issuers with a new mobile device channel for delivering Verified by Visa and MasterCard SecureCode online credit card transactions.

June 10, 2003

Government warns banks about virus-like infection

Ted Bridis of AP reports "the government is warning financial institutions about a virus-like infection that has targeted computers at roughly 1,200 banks worldwide, trying to steal corporate passwords."
Experts said the BugBear software was programmed to determine whether a victim used an e-mail address that belonged to any of the 1,300 financial institutions listed in its blueprints. If a match was made, it tried to steal passwords and other information that would make it easier for hackers to break into a bank's networks.

Keeping the faith: protecting personal data

In his last column for eWeek, Timothy Dyck comments on data security.
This year, California is again shaking the branches with SB 1386, a bill that goes into force just weeks from now on July 1. It requires any organization conducting business in California or?and this is a big "or"?storing personal information on any California resident to disclose to those customers when personal data is reasonably believed to have been compromised. The brand damage done by telling customers that a break-in has occurred, combined with the risk of lawsuits in case of noncompliance, add up to a powerful incentive to be serious about attack defenses and data encryption to limit damage if a break-in does occur. In addition, SB 1386 even exempts companies that have encrypted customer data from the notification requirement?one more example where this legislation makes good sense easier to cost-justify.

June 09, 2003

Payment risk mitigation for card issuers

Geoff Griffin of Edgar, Dunn has posted a piece on payment risk mitigation for card issuers.
We believe that collecting cardholder payments more quickly and optimizing the clearing and settlement channel based on a combination of risk and other factors provides a strong foundation for effective payment risk mitigation. The seven key payment risk mitigation strategies outlined here not only reduce risk exposures but can also lead to increased cardholder spend and fewer customer service calls.

BCG examines how the most successful banks create shareholder value

BCG is out with a new report today titled "Creating Value in Payments" that examines how the most successful banks create shareholder value.
Consolidation in global banking continues apace. The world's largest ten banking companies increased their share of worldwide bank market capitalization to 24 percent in 2002 from 19 percent in 1998.
Another interesting BCG study published in late May examines how banks might choose to use the strategies of Dell and Nike to compete more effectively by achieving scale in non-core business activities without paying acquisition premiums to get there.


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