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« September 4, 2005 - September 10, 2005 | Main | September 18, 2005 - September 24, 2005 »

September 17, 2005

Weekend Reading: Contactless Payments And The Security Challenges

David Birch of Consult Hyperion writes for Principia on contactless payments and how they deliver appropriate levels of security and privacy.

In a typical retail environment the retailer's point-of-sale (POS) terminal and the payment token both contain a microprocessor; the microprocessors communicate using a payment protocol (on top of the ISO 14443 protocol for basic data exchange).

When it is time to pay, the customer brings their tag close to the POS terminal. The terminal interrogates the card and gets back the serial number and a cryptogram (a one-time code calculated inside the token). It feeds these to the acquiring bank, which passes them back to the issuer. From the serial number, the issuer knows which account to authorise and from the cryptogram the issuer knows that the token is valid.

The cryptogram is made up from the serial number and a transaction counter, encrypted using the token security key. This key is inserted in the token during manufacturing; it is derived from the serial number and a bank master key. Once in the token, it is never divulged.

Weekend Reading: Latest Bank Investor Presentations

[Update: 2/1/06 - See this post for updated links to new bank investor presentations!]

The Lehman Brothers 2005 Financial Services Conference was held earlier this week and many banks participated with updated presentations on their strategies, etc.

Here are some links to those presentations (mostly PDF's): Bank of America, Commerce, Fifth Third, Huntington, JP Morgan Chase, KeyCorp, M&T Bank, National City, PNC, SunTrust, Synovus, US Bank, Wachovia, Washington Mutual/Providian, and Wells Fargo.

Presumably at next year's conference MasterCard will be presenting as a public company!


September 16, 2005

First Data Semi-Annual Investor Conference

First Data Corp. held one of its semi-annual investor conferences yesterday in Denver focused on its international businesses. The slides from the conference presentation (PPT) are available online.

Coinbridge: New Point of Payment Consulting, Integration and Research Firm

Coinbridge, a new point of payment consulting, integration and research firm has just launched its new web site.

Coinbridge was founded by Ryan Donahue. A founding member of the PayPal design and user research group, Donahue was instrumental in the strategic design of PayPal's merchant services and played a key role in defining the customer experience for many of PayPal's most successful products from 2000-2005.

Mastercard IPO Plan Values Company At $5 Billion

The Globe and Mail carries a Bloomberg report on MasterCard's IPO plans.

The $5-billion valuation gives Purchase, N.Y.-based MasterCard a price-to-earnings multiple of 11.7 times, similar to that of Capital One Financial Corp. The sale may push Visa International Service Association, the largest card company, to consider an IPO that could value it at triple MasterCard, said David Robertson, publisher of Nilson Report, a credit card newsletter.

"Now that there's a firm valuation to MasterCard, investment bankers and others are going to be pressuring Visa to make a similar move," Mr. Robertson said. "There's tremendous unrealized value in Visa."

September 15, 2005

Mobile Payment Has Growing Pains

AP Technology Writer Brian Bergstein reviews the MobileLime mobile payment service from Watertown, Mass.-based Vayusa Inc.

Most attractive are the discounts many MobileLime merchants offer in exchange for being able to track your spending. I got two freshly made smoothies for a total of just $1.09 thanks to the combination of two such deals. But that's about the only real advantage. It's not like you actually can leave your wallet at home.

MasterCard IPO to Sell as Much as $2.45 Billion Stock

MasterCard has announced it has filed a registration statement with the SEC for its proposed IPO.


Fidelity National Financial and Certegy Announce Merger

Fidelity National Financial and Certegy have announced the signing of a definitive Merger Agreement under which Fidelity National Information Services, Inc. and Certegy will combine operations to form a single publicly traded entity.


Gartner: Paypal Threatens Banking Business

Dan Ilett reports for on Gartner's report on PayPal's micropayments pricing written by Avivah Litan that we reported on last week.

Banks and vendors should sell PayPal payments to retail customers, instead of trying to compete with the online company, an analyst has claimed.

Australians Shunning Credit Card Debt

The Sydney Morning Herald reports on the Reserve Bank of Australia's September bulletin showing a contraction in the value of credit card transactions to $13.544 billion in July from $14.209 billion in June.

CommSec chief equities analyst Craig James said there had been a noticeable slowdown in credit card activity in 2005. "The remarkable thing is the average credit card balance is actually lower now than what it was in December of last year," Mr James said. "So for a seven month period, you've actually seen the balance contract rather than expand and that's just unheard of."

September 14, 2005

UK Competition Commission Says Store Cards Lack Competitive Pressures

The UK's Competition Commission has announced that it has provisionally concluded that the market for private label store cards and associated insurance isn't competitive. In a press release (PDF), the Commission said:

The Competition Commission (CC) has provisionally concluded that there is an adverse effect on competition in connection with the supply of consumer credit through store cards and associated insurance in the UK. It has estimated that in broad terms, store card APRs are on average some 10 to 20 per cent higher across the store card market as a whole than they would have been had they reflected providers’ costs, including the cost of capital. The detriment to cardholders in terms of the excess prices paid for credit and insurance is in the region of £80 million to £100 million a year.
Full details on this inquiry are provided on the Competition Commission's web site.

September 13, 2005

HSBC Begins Issuing MasterCard PayPass Debit Cards

HSBC Bank USA has announced that is has begun issuing new debit cards with MasterCard PayPass contactless technology. The bank said it expects to issue about 1 million cards through the end of 2005 and will be the first bank to completely reissue its debit cards to include PayPass.


Cash Goes in, Gift Certificate Comes Out -- Coinstar Now Offering Gift Certificates Redeemable At With No Transaction Fee

Coinstar and have announced the two companies will team to provide a convenient new way for consumers to use cash to make online purchases. The Coinstar and Amazon agreement makes it possible for customers to exchange coins and also bills at Coinstar Centers -- with no transaction fee -- for a gift certificate redeemable at


TOM Online Inc. Launches Mobile Functions Joining Forces with UMPAY to Provide Mobile Payment Services in China

China's TOM Online has signed a strategic cooperation agreement with UMPAY (Union Mobile Pay Ltd.) to jointly develop and market bank card, debit card and
credit card-based mobile payment products and services in China.


September 12, 2005

With PayPal Backing, Will Micropayments Work This Time?

Evan Schuman writes for Ziff Davis Internet on PayPal's recent modification to its pricing for micropayments - defined as purchases typically less than $2.

BankFirst Partners with Next Estate Communications and Joins Green Dot Financial Network

BankFirst and Next Estate Communications have announced a master agreement allowing BankFirst's 150+ prepaid card programs to be reloaded at Next Estate Communications' Green Dot(TM) Financial Network retail locations.


eBay To Acquire Skype

[Update: eBay has posted on its web site the presentation (PDF) used in its investor call earlier this morning.]

eBay has announced an agreement to acquire Skype Technologies SA for $2.6 billion plus additional performance-based compensation.

The acquisition will strengthen eBay's global marketplace and payments platform, while opening several new lines of business and creating significant new monetization opportunities for the company. The deal also represents a major opportunity for Skype to advance its leadership in Internet voice communications and offer people worldwide new ways to communicate in a global online era. Skype, eBay and PayPal will create an unparalleled ecommerce and communications engine for buyers and sellers around the world.

PayPal and Skype also make a powerful combination. For example, a PayPal wallet associated with each Skype account could make it much easier for users to pay for Skype fee-based services, adding to the number of PayPal accounts and increasing payment volume.

In its press release eBay said the acquisition will be dilutive to earnings for the next year, reaching breakeven on a pro forma (but not GAAP basis) in the fourth quarter of 2006.

September 11, 2005

Chinese Banks Test Investors' Patience

Don Lee reports for the Los Angeles Times on the state of affairs with Chinese banks.

Chinese banks have made progress, but they're still loaded with bad debt and operate inefficiently. Weak corporate management and corruption remain a problem at many banks. Last weekend, China's bank regulator reported that 1,700 employees were held for embezzlement and other bank crimes in the first half of this year. There could be more trouble ahead.

Morgan Beaumont Creates Debit Cards For People Without Bank Accounts

Dana Sanchez reports for the Bradenton (Florida) Herald on Morgan Beaumont, a local company that has developed a national platform for loading funds onto stored value abd debit cards.


MBNA Sale Could Cost Delaware $50 Million In Taxes

Ted Griffith reports for the Wilmington News Journal on the potential loss of $50 million in tax revenue to the state of Delaware if Bank of America moves MBNA's bank charter to another state.

Industry observers believe Bank of America has selected Arizona as the legal home for its credit card bank in the past because the tax bill there is lower than what the bank would have to pay in other states, including Delaware.

RFID: Switching Off Credit Card Fraud

Prasad Paturi writes an opinion piece for RFID Journal on why the new contactless RFID-based payment cards should include a switch to turn them on/off.

The antenna of a passive RFID tag is the powerhouse for the microchip that stores and transmits data. If a card were fitted with a switch to make or break the connection between the chip and antenna, the cardholder could squeeze the switch to turn on the card and wave it before a reader to make payments. Ideally, this feature should come as a default with the credit card, ensuring no data is captured from the card and no payment is made without the notice and permission of the owner.


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