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« July 27, 2003 - August 2, 2003 | Main | August 10, 2003 - August 16, 2003 »

August 08, 2003

The Value in Stored Value

Lauri Geisen has an excellent article on stored value cards in the current issue of Banking Strategies magazine.
There are several ways that banks can make money from stored-value cards. With the consumer cards, there is first the upfront fee, typically a couple of dollars per card above the value retained. Then, with re-loadable cards, there is usually a flat fee charged each time the card is loaded. Additionally, card issuers receive interchange fees when a card is used to make a purchase.

August 06, 2003

Risk management principles for electronic banking

The Bank for International Settlements has published a new guide (PDF) for bankers in managing the risks associated with electronic banking activities.
Based on these conclusions, the Committee considers that while existing risk management principles remain applicable to e-banking activities, such principles must be tailored, adapted and, in some cases, expanded to address the specific risk management challenges created by the characteristics of e-banking activities. To this end, the Committee believes that it is incumbent upon the Boards of Directors and banks' senior management to take steps to ensure that their institutions have reviewed and modified where necessary their existing risk management policies and processes to cover their current or planned e-banking activities. The Committee also believes that the integration of e-banking applications with legacy systems implies an integrated risk management approach for all banking activities of a banking institution.
Interesting. I'm trying to recall approximately when the first online banking activities began in the United States. Prior to the Internet, there were proprietary dial-up based packages offered by several of the major banks. After Netscape launched its browser and server products, banks like Wells Fargo launched their online banking services. Seems like that must have been in the '96-'97 timeframe, about six years ago. Regulators eventually catch up with technology's evolution -- this BIS recommendation to board members and senior bank management being an excellent example.

NACHA to test model for universal electronic bill distribution

NACHA announced this morning that it will conduct a pilot of the Electronic Billing Information Delivery Service (EBIDS).
Under the EBIDS model, a billing company would originate a zero-dollar ACH transaction that contains a summary of a consumer's billing information in an attached addenda record, and enter the transaction into the ACH Network through its corporate bank. The consumer's financial institution would receive the transaction via the ACH Network, and present the billing information at its Internet banking web site. The consumer would enter the Internet banking web site, using the financial institution's existing logon procedure, and view the bill and authorize payment. The consumer's financial institution would then send an ACH credit back to the biller's bank, along with remittance information.
The Western Payments Alliance is hosting a teleseminar on EBIDS on September 4th.

August 05, 2003

Encryption mandate puts strain on financial IT

Lucas Mearian and Patrick Thibodeau report in this week's ComputerWorld on the costs the financial industry is going to have to bear as a result of mandates to upgrade the existing encryption infrastructure to triple-DES compliance.
Led by Purchase, N.Y.-based MasterCard, the major electronic funds companies began seeking an industry conversion to Triple DES several years ago. But with the deadlines looming, banks and retailers are only beginning to deal with the costly conversion, and they're now calling for deadline extensions. Many of the nation's 360,000 ATMs will have to be replaced to comply, as will some back-end systems. Many applications will have to be rewritten to handle Triple DES.
A Bay Area-based company, iS3, is addressing this market opportunity head on with their Secure OMS product suite designed to assist financial institutions in managing the complex environment of key distribution/update in a 3DES world. They also recently announced a strategic partnership relationship with Visa International.

Constantine and Partners updates merchant settlement information

Constantine and Partners, the law firm representing merchants in the Visa Check / MasterCard MasterMoney litigation, has updated some information about the merchant settlement including the implementation last Friday of reduced interchange fees on Visa and MasterCard signature debit transactions.

Bev Wells named President, CEO of Vital Processing Services

Vital Processing Services, a joint venture of TSYS and Visa USA, announced today that formed Wachovia card executive Beverly Wells has been named president and CEO replacing Jonathan Palmer.
Wells, who has extensive financial and payments-related experience, retired from Wachovia Corporation in 2002 after 26 years of service. Most recently, she served as executive vice president for Wachovia's Retail Division including bankcard services and the acquiring business from the outsourced processing relationship as well as the acquirer back-office support function. In addition, Wells led Wachovia's $7.8 billion dollar credit card operation.

Wendy's to accept credit, debit cards

The Columbus Business Journal reports on Wendy's plan to accept credit and debit cards at 3,000 of its restaurants by November.
Wendy's began experimenting with its EPay system last November at 10 restaurants in Central Ohio. The test was broadened to Seattle, Raleigh, N.C., Boston and Charleston, W.Va., and now about 1,000 Wendy's restaurants take the cards. The trial indicated that letting consumers use their cards at Wendy's makes sense financially and operationally for the Dublin-based company, said Bob Bertini, a spokesman for the hamburger chain.

August 04, 2003

At Starbucks, the future is in plastic

Rob Howe reports in Business 2.0 (subscription required) on Starbucks' success with its gift card program.
"We ask ourselves, As we get big, how do we stay small?" says Anne Saunders, a company vice president and head of Starbucks Interactive, the group that manages the card and the chain's wireless hotspot network. "Our baristas know the customers. The card allows the company to finally know them."

Retailer Cards in the UK

The UK Parliament's Treasury Select Committee explores the profitability of UK retailer store cards. The discussion kicks off with a basic question:
Q410 Chairman: Okay. Why should a well-informed consumer be advised to use one of your store cards charging interest of up to 30 per cent?
More than you ever wanted to know? I was prompted to uncover this interesting bit of testimony by an article in the Economist (subscription required) on payment card fraud losses in the UK. Turns out there were two other transcripts also available on the Committee's list of recent of "uncorrected evidence". Some fascinating reading here for folks like me who enjoy studying payment systems!

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