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« July 31, 2005 - August 6, 2005 | Main | August 14, 2005 - August 20, 2005 »

August 13, 2005

Lawsuit Attacks Credit Card Arbitration Of Disputes

Joseph DiStefano reports for the Philadelphia Inquirer on a lawsuit filed Thursday by 15 class action lawyers that contends that credit card issuers illegally conspired to force cardholders to submit disputes to arbitration instead of going to court.

The suit asks the court to stop the practice of requiring arbitration and to pay court costs and unspecified damages. The lawsuit contends that the arbitration services used by major lenders are far more likely to find in favor of the banks than of the consumers.

August 12, 2005

Chase's blink Card: Blinking Along in Denver Update

A few weeks back, we posted an initial Denver field test report of Chase's blink card from our friend Linda Elliott.

Today, she's back with an update. This is more great stuff from Linda, just in time for the weekend. Enjoy!

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Innovations, Incentives, And Regulation: Forces Shaping The Payments Environment

The Federal Reserve Bank of Chicago has published a special edition Fed Letter titled "Innovations, Incentives, And Regulation: Forces Shaping The Payments Environment" (PDF) as a follow-up to its fifth annual payments conference held last May and summarizes the conference participants’ responses to the following questions:

  • What emerging innovations have the greatest potential to improve the payment system?
  • Why have certain payment innovations been more successful than others?
  • How does the current legal and regulatory framework affect the adoption of efficient payment mechanisms?

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Today's Quote

Some quotes from today's testimony by Ian Macfarlane, Governor, Reserve Bank of Australia, responding to questions at a hearing of the Australian House of Representatives Standing Committee on Economics, Finance and Public Administration (PDF) regarding payment system reforms in Australia:

I think merchants as a whole have underestimated the power that they really have at their disposal. They are in this mindset because for 30 years they had all sorts of restrictions on them that prevented them from doing things that a normal business should be able to do; in other words, if you choose an expensive way of doing something, they should charge you more than if you choose a cheap way.

For 30 years they had legal restrictions that prevented them from doing that. So some of them have actually developed a very defeatist attitude, as you just described. What we are trying to do is put the power back in their hands to actually stand up to the providers of credit cards and charge cards.

Essentially, the merchants somehow or other have to get together and use some bargaining power. In a negotiation between, say, Amex and a merchant, everyone in Amex has spent every day of their lives becoming an expert and a specialist in payment systems. They negotiate with the merchant. The merchant knows how to buy and sell things and inventory control. He knows almost nothing about payments. It is an incredibly unequal bargain.

Wells Fargo Settles Suit Over Merchant Card Processing Fees

E. Scott Reckard reports for the Los Angeles Times on an agreement Thursday by Wells Fargo to pay as much as $34 million to settle a lawsuit alleging that it had imposed improper credit card processing charges on about 96,000 California businesses.

The disputed charges included extra fees charged by the bank when merchants had to punch in a credit card number by hand, said Howard M. Jaffe, a Los Angeles lawyer representing the businesses.

"If a merchant failed to swipe the card, couldn't get the machine to read it and just manually input the numbers, they'd get dinged — usually by a modest amount, but it added up to millions and millions of dollars," he said.

China: 99Bill and NetEase Launch Online Prepaid Card Payment Platform

99Bill and NetEase.com have announced an agreement to jointly establish an online NetEase prepaid card payment platform. Under the agreement, 99Bill launched the new online payment service to let the NetEase's prepaid online game card users to pay for the third party online products and services, and enable the Internet and wireless service providers to accept the prepaid card payment online.

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New York Fed Conference: Antitrust Activity in Card-Based Payment Systems: Causes and Consequences

The Federal Reserve Bank of New York has announced a conference to be held on September 15 and 16 in New York City examining antitrust activity in card-based payment systems.

In recent years, credit and debit card systems have been the focus of significant antitrust inquiries and actions. Card-based payment businesses in Asia, Australia, Europe, and North America have been investigated for their methods of determining interchange fees, exclusivity arrangements, no-surcharge rules, honor-all-cards rules, membership requirements, and governance policies.

Antitrust activity worldwide has many similarities, such as a focus on interchange fees, and many differences, such as exclusivity rules in one country and no-surcharge rules in another. In addition, antitrust efforts directed at debit card and credit card systems show similarities and differences.

This conference's focus is two-pronged: to present research on the cause and on the effects of antitrust actions. The organizers of the conference hope to address the need for better information on the efficacy of the different remedies mandated by the courts worldwide.

August 11, 2005

Interest Grows In Japanese Mobile E-Purse

Card Technology reports on the Japanese Edy contactless electronic purse and bitWallet, the operator of the scheme.

According to published reports, however, overall monthly Edy transactions topped 10 million for the first time in June.

Earlier this year, a bitWallet source told Card Technology that average transaction amounts for Mobile Edy were running 20% higher than the roughly 400 yen ($3.80) consumers spent with Edy cards. The operator believes the higher transaction amounts may be because consumers can view their purse balances on their handset screens and can top up the account over the mobile network.

About 20,000 merchants in Japan accept Edy cards and Mobile Edy. BitWallet recently enabled users to transfer Edy value from person to person.

Koreans To Pay Transit Fares With Mobile Phones

In yet another example of integrating electronic purse functionality for transit into mobile phones, Card Technology reports on initiatives in Korea to enable subscribers of the three major mobile carriers to be able to use their mobile phones for transit payments.

With it, subscribers of mobile carriers SK Telecom, KTF and LG Telecom will be able to read on their handset screens how much value they have left in their electronic transit purse and to reload the purse over the mobile network. They will not only be able to pay for train and bus fares with a tap of their handsets on gate readers, but also make some retail purchases.

Japanese Companies Expand Push For Contactless Payment

Card Technology reports on NTT DoCoMo's efforts with East Japan Railway to develop a common contactless infrastructure for payments.

Separately, NTT DoCoMo is exploring ways to expand the retailer infrastructure capable of accepting the contactless e-cash loaded on to its mobile phones.

Heartland Payment Systems Announces IPO

Heartland Payment Systems has announced the initial public offering of its common stock at a price of $18.00 per share. Heartland's common stock has been approved for listing on the New York Stock Exchange under the symbol "HPY". The company's final prospectus for this offering is available from the SEC's Edgar site.

Yahoo! and Alibaba.com Form Strategic Partnership in China

Yahoo! and Alibaba.com have announced a definitive agreement to form a long-term strategic partnership in China. Yahoo! will contribute its Yahoo! China business to Alibaba.com and the two companies will work together in an exclusive partnership to grow the Yahoo! brand in China. Yahoo! is investing $1 billion in cash to purchase Alibaba.com shares from the company and other shareholders giving it a 40 percent economic interest with 35 percent voting rights in Alibaba.com.

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Online Payment Firms Target China

Rebecca Buckman reports for the Wall St. Journal on the slew of companies popping up in China to gain a foothold in online payments.

Enter companies such as PayPal, 99Bill and AliPay. PayPal hopes its global brand and experience will win it customers, particularly when it extends its services to Chinese online-auction site EachNet in September. EachNet is wholly owned by eBay. PayPal also is offering "buyer protection" against fraud for transactions on those sites.

Homegrown Chinese payment services think they have an edge over foreign companies because they understand the nuances of how local people like to use the Web, says Oliver Kwan, chief executive of 99Bill, which he founded last year and which has about 80 employees.

CardSystems Termination by Visa USA Final

Péralte C. Paul reports for the Atlanta Journal-Constitution that Visa USA announced Wednesday it will stand by its original decision that CardSystems Solutions no longer will be allowed to process payments on Visa-branded credit and debit cards after Oct. 31.

After the breach was revealed, Visa gave its member banks who use CardSystems until Oct. 31 to find another processor. But Visa agreed to hold further talks with CardSystems at the request of U.S. Rep. Rick Renzi (R-Ariz.), because 90 of the Atlanta company's 115 employees work at a Tucson processing center. The remaining 25 are at CardSystem's Atlanta headquarters. Those talks did not dissuade the credit card giant from its earlier stance, a Visa spokesman said.
In a related story, Paul reports on how the CardSystems breach experience has affected other payment processors including TSYS.
"Everyone in this business has got to understand that their security represents a real reputational risk, not only for them, but for the long-term health and well-being of the entire industry," said Phil W. Tomlinson, TSYS' chief executive officer. "We can't allow these breaches to continue," he said. "If not, the regulators will do it for all of us, and it will not eliminate the sloppy or rogue players."

Juniper To Issue Us Airways Credit Card

Ted Griffith reports for the Wilmington (DE) News Journal on Juniper Bank's $455 million deal to become the credit card issuer for US Airways following its upcoming merger with America West. Juniper is displacing Bank of America as US Airway's credit card issuing partner.

According to the regulatory filing, there will be a two-year transition period in which both Bank of America and Juniper will be able to issue cards under the US Airways brand. After two years, Juniper gets exclusive rights.

Credit Card Penalties Hit New Highs

Jane Kim reports for the Wall St. Journal on how major credit card issuers are now charging maximum penalty rates of over 30 percent.

The higher penalty rates could have a big impact on cardholders later this year when many issuers are expected to boost monthly minimum payments in response to guidelines issued by federal bank regulators, adds Greg McBride, a senior financial analyst at Bankrate.com. The guidelines call for minimum payments that are high enough to cover finance charges and fees during the billing cycle while chipping away at some of the consumer's original debt, or principal.

August 10, 2005

CyberSource Enhances Merchant Anti-Fraud Tools

CyberSource has announced new anti-fraud capabilities for its Decision Manager system.

READ MORE »

August 09, 2005

First Data Decides to Exit Encorus Business

First Data Corp. this evening announced that is has decided to write-off its investment in the Encorus business. Encorus was a company focused on mobile payments. it was founded by FDC in November 2001.

Gartner: CardSystems Flaw Shows Deep Credit-Card Security Problems

Gartner analyst Avivah Litan has published an analysis of the CardSystems Solutions card data compromise.

This event points, in particular, to shortcomings in the industry's recently adopted Payment Card Industry (PCI) standards and audit process. Gartner believes that the PCI audit process has been shallow, random and incomplete, and that the card industry needs to accept responsibility for a weak audit process based on overly general standards that need to be updated and strengthened with more details based on practical implementation issues. The fallout and penalties from this incident should not only be levied on CardSystems, but also on the credit-card associations and their approved auditors.

Google Merchant Payments Solutions Jobs

Google has posted several positions in Mountain View for its Merchant Payments Solutions business.

First Data Enters into Agreement to Purchase Citi Merchant Services Unit and Form Merchant Alliance with Citibank

First Data Corp. has announced the signing of a merchant services alliance agreement with Citibank. First Data will purchase Citibank's current U.S.-based Citi Merchant Services unit, which provides credit and debit card payment processing services to approximately 15,000 merchant locations, and manage that business in an alliance with Citibank.

Retail Decisions and Paymentech Launch New Electronic Check Service

Retail Decisions has announced the launch of a new electronic check service in conjunction with Paymentech. Called ReD eCheck, offers merchants electronic check processing software and conversion hardware as a single integrated solution for performing point-of-purchase (POP) and accounts receivable conversion (ARC) transactions.

"We are always looking for innovative solutions to assist our merchants in lowering their aggregate costs of check processing and in streamlining their business processes," said Greg Schaub, Senior Vice President of Business Development for Paymentech. "We looked to ReD as a long-standing partner of ours to help develop a way to address these challenges through a single, fully integrated solution."

"Faster funding, faster processing and faster reconciliation means that Paymentech merchants can realize true financial benefit from deploying the ReD eCheck service," stated Xavier Kris, CEO of ReD USA. "We are delighted to work with Paymentech to develop this service, and it is a further testament to our reputation as an organization that rapidly responds to both merchant and partner needs."

Will Oyster follow Octopus?

Mark Vernon reports for ZDNet UK on contactless payments.

Apart from being wireless, the key issue which FeliCa seems to have cracked is that of micropayments. Micropayments represent a significant percentage of the economy, particularly in the lucrative consumer sector. However, when conducted electronically, using say credit or debit cards, they are often barely financially justifiable since the cost of the transaction is close to or higher than the transaction value itself. FeliCa sidesteps this issue by, in effect, pooling the expensive micropayments into single, larger payments that the user makes when charging up the card (in Japan the scheme is called Edy).

Cash, Credit, Cell Phone, Finger...

Fahmida Y. Rashid reports for Forbes.com on new ways to make payments.

Bottom line: Alternative payments won't take off until merchants are convinced that it differentiates them from other retailers and will drive customers to their stores. Still, for shoppers, these methods are like something out of The Jetsons, and that's pretty cool.

August 08, 2005

TSYS Finalizes Contract With Capital One

TSYS has announced the completion of a five year definitive agreement with Capital One to provide processing services for its North American portfolio of consumer and small business credit card accounts.

We are very pleased with the spirit of partnership that we've found with TSYS," says Catherine West, President of US Card, Capital One. "This outsourcing agreement provides Capital One access to TSYS' innovative technology platform and creates the foundation for a long term partnership."

The Maverick

Bloomberg senior writer Edward Robinson profiles Wells Fargo CEO Dick Kovacevich (PDF) and his focus on retail banking.

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