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July 31, 2005

Social Security By The Numbers

The AP reports on efforts to tighten access to Social Security numbers, saying they have evolved into "dangerous master keys for fraud."

One solution could be a "federated identity" system that relies on the mathematical principles of cryptography to ensure information can be transferred only among prearranged parties.

For several years, technologists with the Liberty Alliance, an industry consortium, have been developing a way for people to log in to one network and be automatically authenticated at another.

The idea is to avoid sharing a single password among multiple parties with which you transact business — the model followed when your bank and insurance carrier both ask for your Social Security number. Instead, one site sends another an encrypted numeric token that represents the user’s identity — but only for that single Web session or transaction. The token is useless to anyone else or at another time.

The alliance’s brain trust is now exploring ways its system can be applied more broadly in online systems where most identity thefts happen.

Sign the Back of Your Credit Card?

Jolayne Houtz of the Seattle Times answers a reader's inquiry about not signing the back of credit cards and instead writing: "See photo ID."

A Visa USA spokesman said the company "does not accept 'see ID' as a valid substitute for a signature." Leaving it blank hinders the merchant's ability to compare signatures, he said.

Your best bet: Do both, said Melissa Wolff, loss-prevention and compliance manager for the Washington State Employees Credit Union. It is OK for cardholders to squeeze both their signatures and the "see photo ID" phrase onto the back of the card, she said.

Who Goes, Who Stays at MBNA?

Ted Griffiths reports for the Wilmington, Delaware News Journal on the potential impact MBNA's acquisition by Bank of America may have on the local community.

For Delaware, the stakes are enormous. Wilmington-based MBNA has about 10,500 Delaware workers, more than any other business. Charlotte, N.C.-based Bank of America also has a sizable Delaware presence, operating credit card call centers in Dover and near Christiana that employ a total of about 1,300. MBNA and Bank of America have said they will eliminate 6,000 jobs between the two companies after the buyout closes, although they haven't said where.

July 30, 2005

Plaintiffs' Lawyers Argue Kendall Won't Sink Their Interchange Cases

Digital Transactions reports on why other class action lawsuits against Visa, MasterCard and a number of member banks are more likely to succeed that was the case with a California small business interchange anti-trust case that was dismissed earlier this week.


The State of Biometric Authentication

Joern Wettern writes for on the state of biometric authentication.

Biometric devices can fulfill one of two functions: identification or authentication. When performing identification functions, they mainly improve the ease of use of an access control mechanism. Today, most companies use devices like that to make it easier for employees to identify themselves—placing your hand on a palm reader is often quicker and more convenient than digging out an access card or typing a username.
Meanwhile, from DefCon 2005 comes a report on a talk about how to hack biometrics.
The grand scheme of it all is that there are several places to attack, the sensor, the feature extractor, the storage computer and the comparison unit. You can also attack communication between these points, be they traces on a circuit board or a network link.

July 29, 2005

Australian Credit Card Overhaul Attacked

Matt Wade reports for tomorrow morning's Sydney Morning Herald on a new analysis performed by Network Economics and sponsored by Visa that shows that the changes introduced in credit card interchange fees in 2003 by the Reserve Bank of Australia "had either a negligible or, more likely, a slightly negative effect on consumer welfare."


Charge It . . . but Check the Math

Gayle Keck and R. Paul Herman report for the Washington Post on dynamic currency conversion -- where purchases are rung up in US dollars at merchants abroad.

It could be a bad deal. If the transaction is run in dollars, cardholders can get socked with a dismal exchange rate, compared with charges that are processed in the local currency (euros, for example) and converted at or near the interbank clearing rate by Visa or MasterCard.

Oracle eyes India's i-Flex reports on Oracle's interest in potentially acquiring a controlling interest in India's i-Flex Solutions Ltd.

July 28, 2005

Consumer Action Surveys Universal Default Practices

San Francisco Consumer Action has released the results of its 2005 Credit Card Survey (PDF) focusing on the use of universal default by card issuers to increase interest rates on revolving balances based upon changes in their credit profile as reported monthly to the issuers by credit bureaus.


Bruce Schneier on Identity Theft

Jim McKay interviewed security technologist Bruce Schneier for Government Technology.

It's simply too easy to use identity information to commit fraud. Someone shouldn't be able to complete a form in a magazine and open a credit card in my name. Someone shouldn't be able to guess my password and make large monetary transfers in my name.

Financial services needs to slow down and take security more seriously. Europe is a good model here -- identity theft is less of a problem because it's harder to use personal information to commit fraud.

Of course, banks and credit card companies are going to oppose any limits on their business. They like the fact that it's trivially easy to get a credit card. But they're not bearing the full costs of identity theft.

July 27, 2005

Fiserv Signs Definitive Agreement To Acquire BillMatrix Corp.

Fiserv announced today that it has signed a definitive agreement to acquire BillMatrix Corp., a provider of electronic bill payment services.

BillMatrix is expected to generate revenue of approximately $90 million in 2006. The purchase price is approximately $350 million, and the transaction is expected to close in the third quarter. The transaction is expected to be neutral to earnings in 2005 and slightly accretive to earnings in 2006.


Card Fees Under Attack in UK

The UK's Office of Fair Trading has announced it has written to "eight major credit card companies regarding its provisional conclusion that the levels of default charges they impose (e.g. for late payments) are excessive." Jill Treanor reports on the story for the Guardian.


Credit Card Industry Wins Price-Fixing Suit

Robin Sidel reports for the Wall St. Journal on Monday's decision by a federal judge in California dismissing one of several recent lawsuits brought by merchants against the credit card industry.

In his decision issued Monday, Judge Jeffrey S. White of the U.S. District Court for the Northern District of California, said the plaintiffs in the case lacked legal standing to challenge the fees, in part because they aren't "direct purchasers" of Visa and MasterCard's services. Under federal antitrust law, only direct purchasers can sue on antitrust grounds.
MasterCard issued a press release on the decision.


July 26, 2005

Using Plastic Abroad Gets Pricier

Jane Kim reports for the Wall St. Journal on the issue of currency conversion fees for credit card transactions overseas.

Although there are advantages to using plastic because of the favorable wholesale rate on currency exchanges, in some cases it may make sense to use an automated teller machine and pay cash instead, says Robert McKinley, chief executive of, a payment-card industry Web site.

Visa, MasterCard Win Dismissal Of Merchant Lawsuit

Jonathan Stempel reports for Reuters that Visa USA and MasterCard have won dismissal of a lawsuit by California merchants alleging antitrust violations in setting payment transaction fees.

Will Online Bill Payment Spell the Demise of Paper Checks?

James McGrath of the Payments Card Center of the Federal Reserve Bank of Philadelphia has published a new paper looking at the impact of online bill payment on paper checks (PDF).


Federal Reserve Launches Online Financial Education Project with USA Today

The Federal Reserve Board has launched a new online project with USA Today that teaches middle school and high school students about economics and personal finances by challenging them to construct a newspaper front page.

Students are provided with instructions and a template of the front page of The Fed Today. Over four weeks, they are expected to consult the Federal Reserve's recently redesigned education web information needed to complete all of the elements of the page, including headlines, photos, captions, graphs and statistics.

The project helps teachers meet national and state academic content standards for high school economics and personal finance courses. It may be found at:

Where Data Thieves Go To Shop

Eric Dash reports for the New York Times on what just might be the data theft capital of the US.

While the banks and payment processors have been targets in the largest and highest-profile attacks, security specialists say the payment system's most vulnerable points may be the estimated five million merchants where cards are accepted.

Unlike banks and other financial institutions, merchants often lack technological expertise and management attention to keep their customers' information secure. The widespread use of wireless technology by businesses, as in homes, has left merchants' computer systems increasingly susceptible.

Identrus Secures $20 Million in Venture Capital Funding

Identrus has announced the closing of a $20 million Series B round of financing led by Enterprise Partners Venture Capital and Rho Ventures with participation by existing investor Zions Bancorporation.

"Today's significant investment represents an important validation that identity authentication is a real issue for the banking community and financial services industry at large," said Karen Wendel, CEO, Identrus. "This additional funding will enable us to expand our solutions, deepen our client relationships and continue to build a world-class network."


July 25, 2005

American Express Reports Financial Results

American Express today reported second quarter financial results with net income up 16 percent and earnings per share up 19 percent from a year ago.

Record cardmember spending contributed to a 16 percent increase in discount revenue. This increase was driven by 13 percent growth in spending per basic cardmember, the continued benefits of rewards programs and the net addition of 4.8 million cards-in-force. Spending on cards issued by the company's network partners increased more than 35% from a year ago.


Massive Merchant Credit Card Settlement Progress At Last

Mark Albright reports for the St. Petersburg Times on the payment plan for compensating merchants as a result of the settlement reached in 2003 in the Wal-Mart class action lawsuit against Visa and MasterCard.

MBNA Founder Will Miss Name, But Has No Regrets About Sale

Sara Clarke reports for the Newark Star-Ledger on MBNA founder Charles Cawley's views on the acquisition of MBNA by Bank of America.

During the telephone interview, he recalled the years when MBNA used innovation to make its mark in a financial world dominated by banking giants.

"The (financial) supermarkets were the easiest for me to compete with because they didn't focus well," he said. "The big banks have enormous power once they realize what they have to do. Companies like MBNA showed them how to focus."

Two Stanford Professors Go Fishing for Phishers

Carrie Kirby reports for the San Francisco Chronicle on the work of Stanford professors John Mitchell and Dan Boneh on anti-phishing solutions.

Professor John Mitchell and Associate Professor Dan Boneh have attacked the phishing problem from two angles: helping e-mail users avoid fake sites and preventing thieves from getting other peoples' passwords in their digital clutches. Now they're working on stopping Trojan horse software, spread through viruses, that can steal passwords right off a computer as they are typed.

Australian Bankers Wrestle With Online Security

Steven Deare reports for ZD Net Australia on a meeting held last week by the Australian Bankers Association to discuss the security of online banking and commerce.

The issue of two-factor authentication, which requires two forms of identification, was a major talking point throughout the conference, attendees told ZDNet Australia . National Australia Bank and Bendigo Bank currently offer such security to customers, utilising SMS and password tokens as additional protective measures.

July 24, 2005

Following the Plastic Trail

Jack Naudi reports for the St. Louis Post Dispatch uses the CardSystems' card data security breach to introduce an article on the credit and debit card industry.

In time, two groups evolved to consolidate the regional credit card operations into national -and ultimately, international - associations with uniform standards. Today, they're known as Visa and MasterCard, whose global technology and operations center is in O'Fallon, Mo.


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