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« July 10, 2005 - July 16, 2005 | Main | July 24, 2005 - July 30, 2005 »

July 23, 2005

Special Committee of iPayment Board Rejects CEO Takeover Offer

Last night, the Special Committee of the board of directors of iPayment announced that it had determined that the May 13, 2005 offer by Greg Daily, CEO of iPayment, to buy all of the outstanding common stock of the company for $38 per share undervalues the long-term prospects of the company.

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Arizona Offers Visa Debit Cards for Benefits

Russ Wiles reports for the Arizona Republic on the state of Arizona's rollout of Visa debit cards with JP Morgan Chase for child-support and other payments.

That makes Arizona the first state to combine payments from different programs on one debit card, said Brian Claire, senior vice president at JPMorgan Electronic Financial Services in Chicago.

It's the Miles

John McCormick and John Blemer report for the Knight Ridder News Service on consumer usage of credit cards featuring frequent-flier mileage rewards.

Earning miles or points for free plane tickets, hotel nights and gifts has becoming something of a national obsession for Americans who have found ways to use plastic to pay for groceries, tuition, cars, rental payments, jail bonds and even the final expense -- funerals.

"People don't think they can," said Terry Hemeyer, a spokesman for Service Corporation International, the nation's largest funeral home chain. "But when they find out that they can, they want to do it because they want the miles."

July 22, 2005

Canada Loves its INTERAC Debit Cards

Garth Buchholz writes for InformIT.com on Canada's INTERAC PIN-based debit card system.

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FDIC Issues Guidance on Mitigating Risks from Spyware

The FDIC today issued guidance to financial institutions on steps they should be taking to mitigate risks from spyware from both a bank and a consumer perspective.

Spyware poses a significant risk to financial institutions and its customers. Practices to prevent and detect spyware should be regularly reviewed to ensure that an institution is aware of all risks to its systems and to sensitive customer information.

eBay Tests Expansion Of Paypal Antifraud Program

Juan Carlos Perez reports for InfoWorld on the trial in Germany of a new PayPal buyer protection program called "Pay with PayPal and You're Covered".

The trial expansion of the PayPal Buyer Protection program centers on removing requirements for sellers to qualify for it, which means more buyers will be covered, said PayPal spokeswoman Amanda Pires.

London Transport Plans E-money Scheme

Transport for LondonDaniel Thomas reports for Computing on plans by London Transport to extend the use of its Oyster smart cards to allow commuters to use them to pay for low value goods and services at newsagents, fast food outlets, supermarkets and parking machines.

'Oyster has the largest customer base of all smart cards in the UK, with 2.2 million users and a significant level of public trust,' said Jay Walder, managing director of finance and planning at TfL.

'Extending Oyster to include low value payments is a natural progression which will make the smart card even more convenient.'

Companies and consortia bidding to run the project are: alphyra; Barclays; BBVA, Accenture, MTR and Octopus; EDS and JP Morgan; Nucleus, Dexit, Ericsson, Hutchison 3G and Euroconex; PayPal; and Royal Bank of Scotland.

TfL first announced its plans for Oyster e-money in March and hopes to use the scheme to generate additional revenues for the London transport system.

More information about Oyster is available at its web site. A press release issued earlier this week lists the shortlist of potential partners for the project.

Sending Money for Less

Tom Van Riper reports to the New York Daily News on a potential new law that could result in big savings for consumers by boosting the amount of money transfer services offered by credit unions.

The Expanded Access to Financial Services Act, which was passed by the House in April and now awaits a vote in the Senate, would allow credit unions to offer money transfer services - along with check cashing and money orders - to nonmembers.

That could open a floodgate of new competition to challenge Western Union's and MoneyGram's combined 78% market share, significantly lowering transfer fees for local immigrants.

CardSystems Tries to Avert 'Extinction'

Josh Sanburn reports for the Altanta Journal-Constitution on testimony by CardSystems' CEO John M. Perry at yesterday's House subcommittee hearing on credit card data security.

In testimony before the House Financial Services subcommittee on oversight and investigations, Perry said that "as a result of coming forth with this important information, CardSystems is being driven out of business."

The CardSystems CEO said he was concerned that other companies might hesitate to come forward about security breaches if his company goes under.

Jonathan Krim also covers yesterday's hearing for the Washington Post.
Representatives of the credit card companies yesterday also supported proposals to extend federal security requirements to payment processors, not just banks and financial institutions covered by current law.

July 21, 2005

Testimony from Today's House Committee Heading on Credit Card Security

The Subcommittee on Oversight and Investigations of the House Committee on Financial Services held a hearing today titled "Credit Card Data Processing: How Secure Is It?" The prepared testimonies from the industry speakers are available online.

Security Breaches Of Customers' Data Trigger Lawsuits

David Bank reports for the Wall St. Journal on litigation against companies involved in security breaches that release customer data.

Some legal experts say the courtroom action may be more effective than legislation or regulatory action in spurring adoption of common-sense security practices. "These class-action suits will in a somewhat perverse way allow the forces of the marketplace to act as the enforcement mechanism," said Tom Holt Jr., a lawyer with Kirkpatrick & Lockhart Nicholson Graham LLP in Boston, which defends companies against data-loss claims. "The companies that have behaved most diligently will be in the best position to defend themselves."

U.S. Chamber of Commerce and Visa USA Launch Nationwide Data Security Campaign

Visa USA and the U.S. Chamber of Commerce have announced a nationwide data security campaign to encourage a more coordinated effort between the payments industry and merchants in the fight to protect customer data and reduce fraud.

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July 20, 2005

CardSystems CEO Fires Back at Visa

Eric Dash reports for the New York Times on CardSystems Solutions CEO John Perry's criticism of Visa for stopping his company from processing its cardholders' transactions.

"If they decide to move forward, they will put us out of business," Mr. Perry said. "We are unaware in all of the breaches that have occurred on the system in the past that anyone has ever been terminated from the system."

PayPal Financial Results

PayPal's parent eBay announced second quarter financial results this afternoon.

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Bonus Points and Other Incentives Attract Consumers to Credit Cards

Vertis has announced the results of its "Customer Focus 2005: Credit Card" study identifying the most attractive incentives for consumers.

According to the study, 29 percent of men 18-24 years old are interested in receiving points for merchandise/airline tickets, while 14 percent of women in the same age category prefer an initial sign-up bonus such as a rebate or coupon.

For 27 percent of men 25-34 the most alluring offer was money back on purchases; meanwhile, 34 percent of women 25-34 expressed most interest in receiving points for merchandise/airline tickets.

Getting an extended or higher limit on a credit card was only appealing to 8 percent of the credit card holders surveyed.

44 percent of total adults pay off their credit card balance each month, compared to 51 percent in 2002. 61 percent of adults 65+ stated they pay off their credit card balance each month, compared to 75 percent in 2002.

JP Morgan Chase Reports Second Quarter Results

JP Morgan Chase this morning reported second quarter financial results (PDF). Chase's Card Services unit, which includes both card issuing and merchant acquiring businesses, reported revenues of $3.9 billion, up 3 percent over the same quarter last year.

On the issuing side, card charge volume was $75.6 billion, up 7 percent and average managed loans outstanding were $135.2 billion also up 7 percent. Chase opened a net of 2.8 million new accounts, up 27 percent.

Merchant processing volume was $141.2 billion, up 18 percent, on 4.7 billion transactions, up 21 percent.

Expenses overall increased only 1 percent.

July 19, 2005

Congress to Scrutinize Credit Card Data Breaches

The House Financial Services Subcommittee on Oversight and Investigations, chaired by Rep. Sue W. Kelly (NY), will be holding a hearing this Thursday, July 21 to continue the Committee’s investigation of personal data breaches and data security.

The hearing, which is entitled Credit Card Data Processing: How Secure Is It, will focus on data security gaps in the credit card transaction process. At issue is the integrity of the mechanisms in place at the time of a breach such as the high-profile cases that have been reported recently and the allocation of responsibility for maintaining data security throughout the credit card payment system.

Subcommittee Chairwoman Kelly said, “Consumers everywhere deserve to know for certain that their credit card accounts are safe and secure as they are processed. This hearing will help us learn more about the troubling breach by CardSystems as we develop ways to make sure this is an anomaly that will never be repeated.”

Scheduled to testify are:
  • Joshua L. Peirez, Senior Vice President & Associate General Counsel, Law Department, Mastercard International
  • Steve Ruwe, Executive Vice President, Operations & Risk Management, Visa U.S.A.
  • Zyg Gorgol, Senior Vice President, Fraud Risk Management, American Express
  • Carlos Minetti, Executive Vice President, Cardmember Services, Discover Card
  • David B. Watson, Chairman, Merrick Bank
  • Mallory Duncan, General Counsel, National Retail Federation
  • John M. Perry, President and Chief Executive Officer, CardSystems Solutions
  • Evan Hendricks, Editor and Publisher, Privacy Times

American Express Cuts Ties with CardSystems

James Kelleher reports for Reuters on American Express' plans to cease using CardSystems Solutions by October. Amex's action follows earlier action by Visa USA to remove CardSystems as an approved processor and third-party agent for handling Visa card data.

Ask Glenbrook: Credit Card Mail Solicitation Volumes

We received the following question earlier today:

Q. I read a great article published by you in 2002 on credit cards and direct mail. Do you have any idea or guesses on direct mail volume for the following credit card issuers: Providian, Citibank and Discover? If not, do you know any good secondary or primary sources?

A. See the Mail Monitor service offered by Synovate.

Mail Monitor® is the credit card industry ‘standard’ for monitoring direct mail volume and response rates in the US and Canada. It provides real-world perspective on developing trends, defines the market’s competitive framework, and analyses the performance of credit card direct mail acquisition programmes.

Visa USA Bars Transactions from CardSystems

Eric Dash reports for the New York Times that Visa USA said yesterday it would stop allowing CardSystems Solutions to handle Visa transactions as a result of recent security breach issues with the firm.

"CardSystems has not corrected, and cannot at this point correct, the failure to provide proper data security for those accounts," said Tim Murphy, Visa's senior vice president for operations in a memorandum sent to several banks. "Visa USA has decided that CardSystems should not continue to participate as an agent in the Visa system."
Dash reports that Visa has given eleven banks using CardSystems as a processor until the end of October to change to another processor.

PayPal China Is An Open Platform

Pacific Epoch has posted portions of an interview with PayPal China country manager Jeff Liao (reg. reqd).

We have Netease, we have Tom Online, we have a strategic alliance with ChinaPay - the alliance is to share their Internet merchant base with us. PayPal, "Bei Bao" in China is going to be an open platform. So almost any Chinese Internet site can use PayPal.

US Bank Grows Merchant Processing Revenues by 20 Percent

US Bank reported second quarter financial results this morning that included growth in revenues from merchant processing of 20 percent for the quarter over the same quarter last year. Merchant processing revenues were $198 million for the quarter vs. $165 million last year.

Merchant processing services revenue was higher in the second quarter of 2005 than the same quarter of 2004 by $33 million (20.0 percent), reflecting an increase in sales volume, new business, higher equipment fees and the expansion of business in Europe.

Wal-Mart Applies to Form Utah ILC

Jenifer Nil reports for the Deseret News that Wal-Mart applied yesterday afternoon to the Utah Department of Financial Institutions to establish a Utah industrial bank that would process credit card, debit card and electronic check transactions.

The company currently uses a third-party processor for the transactions. Bringing the operation in-house will save Wal-Mart a "significant" amount of money every year, Whitchurch said. He declined to specify how much money would be saved.

"It will be a significant savings when you add up the fractional savings on millions and hundreds of millions of transactions that can be paid to Wal-Mart Bank instead of a money center bank," said Alan Whitchurch, a University of Utah graduate and 20-year banking veteran who comes to Wal-Mart by way of Merrill Lynch Bank.

Spotya! Launches Quick Credit Short Term Loans

Spotya! has announced the launch of Spotya! QuickCash, offering short term loans for Internet users who are short on cash or don't have a credit card.

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July 18, 2005

TransUnion Launches Credit Card Skimming Detection Service

TransUnion has announced Common Point of Purchase, a new fraud detection service designed to identify merchants where magnetic stripe skimming may be occurring. A similar service has been available in Canada for five years.

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PayPal Modifies eBay Payment Policy: Accept All Payments

eBay and PayPal have announced that, beginning August 19, all eBay sellers who offer PayPal as a payment option must accept all forms of PayPal payments "including payments made via PayPal account balances, bank accounts, or credit cards, regardless of whether sellers display the PayPal logo with credit card icons."

When the new policy takes effect, sellers who list with a PayPal Personal account may still receive payments funded via account balance or bank account transfers but must also be willing to upgrade to a PayPal Premier or Business Account if they receive a credit card payment via PayPal from their buyer.

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