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« January 9, 2005 - January 15, 2005 | Main | January 23, 2005 - January 29, 2005 »

January 22, 2005

Morgan Stanley Investors Weary of Discover

Aaron Eistein writes in Crain's New York Business about investor frustrations with Morgan Stanley CEO Philip Purcell.

But now that banks that long issued only Visa or MasterCard are free to issue any card, analysts believe that most will team up with American Express rather than Discover.

AmEx charges merchants higher commissions, so it can share more revenue with banks that issue its cards.

Why Are Merchants Still Accepting Card Payments?

Fumiko Hayashi from the Payments Systems Research Department at the Federal Reserve Bank of Kansas City has published a new working paper: A Puzzle of Card Payment Pricing: Why Are Merchants Still Accepting Card Payments?

This paper presents models that explain why merchants accept payment cards even when the fees they face exceed the transactional benefits they receive from a card transaction.

January 21, 2005

MBNA Holds Investor Day

MBNA held an investor day presentation earlier today. The slides from the company's presentation (PDF) are available online.

CheckFree Results

CheckFree reported results yesterday reporting that it had distributed 32.8 million electronic bills during the fourth quarter, an increase of 11% from the prior quarter. Active subscribers were 6.9 million at the end of the quarter and CheckFree derived an average revenue per transaction of $0.72 on a total of 142.9 million bill payment transactions from those subscribers with 83% of the payments handled electronically. Doing the math, that would indicate an average of 6.9 bill payments per subscriber per month generating $4.96 in monthly revenue/month/subscriber.

Retriever and Iron Triangle Announced Combination

Retriever Payment Systems and Iron Triangle Payment Systems have announced they are combining effective January 1, 2005 with Retriever becoming a subsidiary of Iron Triangle.

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Wal-Mart, GE Consumer Finance Plan New Discover Network Credit Card

Wal-Mart and GE Finance have announced plans to launch a new credit card on the Discover Network. The new card, Wal-Mart Discover, will be issued by GE Consumer Finance and will be available by March 2005.

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MBNA Announces First Staff Reduction

Ted Griffith reports for Delawware Online on the first major job reductions in MBNA's 23 year history.

For Delaware, MBNA's announcement has major economic implications because MBNA for decades has been the "engine" of job growth in Delaware, said Henry Beckler, a Delaware banking industry veteran. Started in a former A&P supermarket in Ogletown in 1982, MBNA enjoyed rapid growth for more than two decades, ultimately surpassing DuPont as Delaware's top private employer.

MBNA is hosting an Investor Meeting and webcast later this morning.

Banks Bearing Brunt of Phishing Attacks

Matt Hines reports for CNET News.com on the latest phishing attack statistics.

In a recent interview with CNET News.com, Mike Cunningham, senior vice president of fraud management at Chase Card Services, a division of financial services giant JPMorgan Chase, said that despite the proliferation of phishing schemes aimed at companies in his industry, consumers have yet to grow reluctant to conduct their business online.

"I don't believe customers are avoiding the online channel because of (phishing), I think they're becoming more wary and figuring out what sort of things banks will or will not send you via e-mail," Cunningham said. "We haven't seen any decline in use of online channels and, in fact, that business continues to grow."

January 20, 2005

Experian Studies Effects of Debt on Consumer Credit Scores

Experian has announced the results of a nationwide study on the effects of debt on consumer credit scores.

Some consumers may think that debt will always have an adverse effect on their credit score. Debt by itself is not a negative factor as long as it is managed well and consumers are not extending themselves beyond their means.

In fact, the national average credit score for consumers with debt above the national average is higher than the average credit score for those with debt below the national average.

The study reported U.S. consumers' average debt of $11,224, 12 percent higher than last year's $10,024. National and statewide results for the study can be found on the Experian National Score Index(SM) Web site at http://www.nationalscoreindex.com.

Commerce Bank's Fee Free Visa Gift Cards

Commerce_Visa_Gift_Card-sma.jpgCommerce Bank has announced some of its early results of its free Commerce Bank Visa Gift Card program, the nation's only fee free complete packaged gift card offered by a bank. Commerce Bank sold more than 220,000 of the cards, worth $14.5 million (an average of about $66 per card), during the recent holiday season.

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CardTech / SecureTech

Thomson has published the agendas for its upcoming CardTech/SecureTech conference to be held April 12-14 in Las Vegas.

Fair Isaac and TSYS Add Advanced Strategy Design Offering

Fair Isaac has announced an expansion of its alliance with TSYS to offer its TRIAD Strategy Design Service to card issuers.

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PayPal Launches New Local Service and Currency for Australian Users

PayPal has announced a new PayPal site in Australia and introduced the Australian Dollar as an additional currency to its service.

"We're very excited to launch new services that further enable PayPal users in Australia to participate in global e-commerce," said Mathias Entenmann, vice president of PayPal's international business. "PayPal continues to expand internationally in order to provide our customers around the world with a safe, easy and cost-effective online payment solution."

January 19, 2005

Credit Card Marketing - Wither the Empire?

Earnings are a lagging indicator of corporate performance—when you want to see where a consumer-focused company actually is and where it's going, you need to go to the mailbox and look at their marketing material.

Judging from the unsolicited offers Glenbrook's Bryan Derman has been receiving of late, we may be growing late in the days of the great credit card industry. See Bryan's opinion piece "Wither the Empire?" on the Glenbrook website.

PayPal Reports 55% Increase in Annual Payment Volume, 53% Increase in Revenue

eBay's PayPal subsidiary reports that its annual payment volume increased in 2004 to $18.9 billion, a 55% year-over-year increase from the $12.2 billion in 2003. Fourth quarter 2004 volume was $5.6 billion, a 51% increase from 2003 and a 21% increase from the third quarter. PayPal revenue grew to $200 million, up 53% from the prior year and 20% from the prior quarter.

PayPal reported 63.8 million total accounts at the end of 2004, an increase of 58% from the prior year. Active accounts at the end of 2004 were 20.2 million compared to 13.2 million a year earlier.

PayPal's transaction loss rate increased 41% from the third to fourth quarters to 0.31% in the fourth quarter, roughly equal to the same quarter a year earlier.

Complete details are in eBay's earnings press release (PDF) released earlier this afternoon.

Passion for Plastic in India

The Financial Express reports from India on the growth in plastic card payments in India.

The total spend in India on a payment card is still less than 1% of the country’s percentile. This indicates that the growth potential of the payment card industry is enormous. Around 30 million people are eligible for creditcards and 150 million people are eligible for debit cards.

Credit And Debit Card Consumer Protections

The Federal Reserve Bank of Phildelphia has published a research discussion paper by Mark Furletti and Stephen Smith analyzing the consumer protections available to credit and debit card users (PDF).

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TSYS to Acquire Full Ownership of Vital Processing Services

TSYS has announced it has signed an agreement to purchase the 50 per cent equity stake that Visa USA holds in Vital Processing Services.

Formed in 1996 as a joint venture between Visa U.S.A. and TSYS, Vital specializes in attractive, cost-effective, turn-key alternatives for acquirers that outsource their merchant business. Beverly Wells will remain the president, a position she has held since 2003.

An 8-K filing by the company reports that it is paying $95 million for the 50 per cent interest it is acquiring.

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American Express Settles Currency Conversion Lawsuit

Tami Luhby reports in Newsday on American Express' settlement of a lawsuit that challenged Amex's disclosure of its 2 percent fee levied on foreign currency conversion.

The company agreed to pay up to $75 million to U.S. cardholders who made purchases in a foreign currency from Mar. 28, 1997 to Oct. 15, 2004, according to a preliminary class action settlement. In addition, the credit card company agreed to include information about the fees on its monthly statements and other mailings to cardholders.

Biometrics Are Coming

Simson Garfinkel writes about biometrics in Technology Review.

Congress gave a sizable Christmas present to the nation’s biometrics industry last month. The word biometrics appears 35 times throughout the National Intelligence Reform Act of 2004, and it establishes the use of biometrics for aviation security, creates a “biometric center of excellence,” expands an FBI biometric system for criminal background checks, requires friendly visa waiver countries to add a biometric to their passports, and mandates the collection of “biometric exit data” for people leaving the United States.

Separately, a press release from Food Service Solutions discusses its system to enable K-12 students to pay for their school lunches using their fingerprints.

“Parents didn’t want to doll out $1.60 for their child every day, or give them a $10.00 bill and wonder if they’d ever see the change,” says Pat Anthony, Foodservice Director for the Wilson School District. “Parents wanted to pre-pay for lunch, but keeping track of accounts with paper and pencil was untenable. And we didn’t want to buy into a system where parents would end up taping PIN numbers to their kid’s hands.”

San Francisco Giants Sponsorship Goes to Bank of America

Eric Young writes in the San Francisco Business Times about Bank of America successfully retaining its position as a major sponsor of the San Francisco Giants, edging out Wells Fargo Bank for the deal.

The team also is close to finalizing terms of an extended sponsorship with San Francisco-based Visa USA Inc., sources said.

Smart Card Technology

Arian-Michele Moore from Celent Communications writes about smart card technology adoption in the US Market for Bank Systems & Technology.

Those close to the payments industry and with an eye on the progress of smart technology know that smart cards will one day take over magnetic stripes and revolutionize the payment industry. It is only a matter of when and how. Industry estimates of when smart cards will have a strong US presence range from five to 10 years and beyond. Celent does not expect them to have a significant presence for at least seven years.

January 18, 2005

Combating Card Fraud

Paul Meadowcroft of Thales writes in SC Magazine on payment card fraud prevention and the opportunity for unconnected EMV smart card readers.

The move towards two-factor authentication for all transactions using smart cards is an important example of a security model that is able to grow organically and embrace and integrate new transaction technologies and channels, as and when required. This kind of flexible, yet secure and dependable system, is key for today's advancing e-business world and, crucially, is now a commercially possibility.

Technology Fueling Wave of Phishing Attacks

Brian Krebs writes in the Washington Post about the growth in online phishing attacks.

Retail Decisions Enhancements for Card Not Present Merchants

Retail Decisions has announced two enhancements to its ebitGuard fraud prevention service: use of neural network technology to better detect abnormal cardholder behavior and dynamic data validation to matches a consumer's billing and shipping information with public record data.

READ MORE »

Pay By Touch and Certegy Form Marketing Alliance for Check Cashing

Pay By Touch and Certegy have announced a marketing alliance to allow Pay By Touch users to cash government and payroll checks at Pay By Touch merchant locations.

READ MORE »

Predicting the Most Valuable Online Customers

IBM researcher Amit Fisher has developed a model that allows retailers to estimate the potential lifetime value of relatively new customers.

It works by not only ‘learning’ from the spending patterns of a single customer, but also from the online activity of other more established customers. This way, by monitoring the buying behavior during the initial visits of a new customer, the model can assign the customer to a group and predict spending patterns based on those with the same 'buying profile'.

Once the model predicts that a visitor to a website has a high probability of purchasing, the company can decide, for example, to customize the experience by making relevant new offers to the right customers or prioritizing the customers’ requests so that they get faster online service.

These new methods could provide a much more effective solution to web traffic management than the ‘first come first serve’ policies currently in place for most web sites. Such technologies are already being used in various domains, especially in the financial arena.

Alan Cane also reports on this story in the Financial Times.

January 17, 2005

China Card Business Booming

Chinaview.com reports on the growth in China's bank card business.

 "Since 1985 when China started to issue bank cards, the country has become the second-largest holder, following the United States which has about 850 million cards issued," said Lin Caiyi, deputy director of the Strategy & Development Department of China UnionPay - the sole national payment network for Chinese banks.

The credit card sector has also enjoyed rapid development, with the number issued jumping from 1.55 million at the end of 2002 to the current level of over 10 million, according to figures made public by Lin at the 2005 China Credit Card Business Forum held in Shanghai over the weekend.

"However, these cards are used very infrequently and the transaction volume generated from their use is very small, especially in terms of personal consumption," she said.

DHS, DOJ Plan Cybercrime Survey

Dibya Sarkar reports for FCW.com on plans by the Departments of Homeland Security and Justice to survey 36,000 businesses this spring to examine the type and frequency of computer security incidents.

Rantala said the full-scale survey will help determine what types of attacks are most common nationally. She said people tend to think that if you have one computer attack, you shore up everything and that prevents anything else from happening. But they fail to consider that hackers develop methods of attack quicker than businesses can respond to them. "In other words, they can open the door faster than we can relock it," she said.

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