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

October 21, 2005

Online Banking Customers - Attitudes and Activities by eMarketer

Russ JonesEditor's note: Glenbrook's Russ Jones recently reviewed an eMarketer report about online banking and found it quite useful. His report follows.

Glenbrook Review: Online Banking Customers - Attitudes and Activities

eMarketer recently completed a 34 page report on the attitudes and activities of online banking customers. Senior analyst David Hallerman pulled the study together in response to a September 3rd article by Eric Dash in The New York Times that explored why veteran Internet users continue to shun online banking.


How and Why Do Consumers Choose Their Payment Methods?

The Emerging Payments Research Group at the Federal Reserve Bank of Boston is holding a two day invitation only conference next Thursday and Friday to explore why consumers choose one payment method over another.


Banks Get New Online Authentication Guidelines

Jaikumar Vijayan and Eric Lai report for Computerworld on last week's issuance of guidance for stronger authentication by banks by the FFIEC.

The new guidelines are not a law, but are more like best practices that banks will be audited against by the end of 2006, a spokesman from the Federal Reserve said. At that time, federal examiners will begin documenting situations where financial institutions are not yet in compliance, he said.

October 20, 2005

New Discussion Papers from the Payment Cards Center - Philadelphia Fed

The Payment Cards Center of the Federal Reserve Bank of Philadelphia has announced two new discussion papers.


New Smart Card Alliance Brief Addresses Contactless Technology

The Smart Card Alliance has released a new position paper -- The What, Who and Why of Contactless Payments.

Contactless payment devices use smart chip technology and are convenient, fast and secure. "They are an ideal solution for quick payment environments where speed is essential, such as quick-service restaurants, gas stations, drug stores, supermarkets and movie theaters," said Randy Vanderhoof, executive director of the Smart Card Alliance.

"And there's built-in security. The smart chip is designed to protect the internal information and any transactions made," he explained. "Plus, contactless payments are built on the current credit and debit card payment infrastructure and leverage their layered security systems."

Financial Sector Security Concerns Leave Consumers Wanting… and Waiting

RSA Security reports on a discussion at its European conference this week where panelists discussed consumer security concerns with online services.

The priceless benefits of customer retention and cost management afforded by online business channels will remain out-of-reach to the financial sector until it addresses its customers’ concerns over security, according to an industry panel at this week’s RSA Conference Europe in Vienna, Austria.
[Editor: Don't you just love that phrase "priceless benefits"! Some great copywriting was done on this press release!]

Separately, Kevin Murphy reports for Computer Business Review Online on comments made by VeriSign CEO Stratton Sclavos on VeriSign's earnings conference call yesterday afternoon.


Bank of America Could Depart TSYS

[Update - 12/21/05 - Bank of America has notified TSYS that it will be bringing its consumer card processing in house.]

TSYS reported earnings yesterday and included commentary about the potential risk of loss of its Bank of America consumer credit card processing business following the bank closing on its previously announced acquisition of MBNA. MBNA currently processes its card portfolio in-house and Bank of America could decide to consolidate its card processing onto the MBNA platform.


Online Banks Race To Raise Yields

Jane Kim reports for the Wall St. Journal on how traditional banks are finally reacting to the success of ING Direct and other online financial institutions by offering new online accounts paying higher interest rates.


October 19, 2005

PayPal Financial Results

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

The following highlights regarding PayPal's third quarter financial performance were included:

  • Payments net revenues grew to $247.1 million, an increase of 44 percent year over the same quarter last year and up 1.3 percent vs. the prior quarter.
  • PayPal's user accounts grew to 86.6 million accounts, up 53 percent year over year and up 9.8 percent vs. the prior quarter. Active accounts grew to 24.5 million, up 41 percent year over year and 7 percent vs. the prior quarter.
  • Total gross payment volume handled by PayPal grew to $6.7 billion, up 44 percent year over year and 3 percent vs. the prior quarter. Total number of payments grew to 117.4 million, up 41 percent year over year and 4 percent vs. the prior quarter. 69 percent of PayPal's payment volume was eBay-related.
  • PayPal earned revenues of 3.60% on payment volume totaling $247.1 million, had expenses of 1.11% of payment volume totaling $74 million and losses of 24 basis points totaling approximately $16 million.

PayPal's expenses include the funding costs associated with card payments used to make payments via PayPal. PayPal's transaction processing expense rate, likely reflecting both a combination of economies of scale in processing as well as its hybrid cost of payment funding (from cards, via ACH and PayPal accounts), has declined from 1.30 percent in the third quarter of 2004 to 1.11 percent in the third quarter this year -- nearly a 15 percent improvement.


UK: OFT Issues Statement Of Objections re: Visa Interchange Fee

The UK's Office of Fair Trading has issued a statement of objections against Visa and its members regarding its domestic multilateral interchange fee (MIF).

The OFT said it is of the view that "the collective agreement between Visa and its member banks on the interchange fee charged between card issuing banks and merchant acquirers on Visa card transactions taking place in the UK restricts competition and infringes Article 81 of the EC Treaty and the Chapter I prohibition of the Competition Act."

The OFT believes that, like the MasterCard MIF agreement, the Visa MIF agreement leads to an unduly high fee being paid to card issuing banks by merchant acquirers on every Visa transaction. The cost of these fees is passed on to retailers and ultimately to consumers.


eBay's New Safe Payment Policy: About Safety or Competition?'s Ina Steiner has written an editorial about eBay's recently announced "Safe Payment Policy".  Her editorial has links to several other posts by other authors commenting on the new policy.


October 18, 2005

Wireless POS: Americans Get The Impulse To Swipe

Jennifer Kingson of the New York Times reports for the International Herald Tribune on wireless point of sale acceptance of payment cards.

Wireless credit card acceptance is not new. But within the last year or two, as wireless companies have improved their networks and hand-held devices have come down in price, the technology has started to look like an attractive alternative to dial-up payment machines.

Citi Simplicity Card Introduced

As rumored last week, Citi today launched Simplicity, a new no annual fee, no late fee (for cardholders who make a purchase or cash advance in each billing period) credit card.


FDIC Releases 2005 Summary of Deposits Data

The FDIC has released its 2005 Summary of Deposits Data that details bank deposits at the individual office level for every FDIC-insured financial institution.

Feds Want Banks to Strengthen Web Log-Ons

Brian Bergstein, AP Technology Writer, reports on last week's FFIEC guidance to banks regarding stronger authentication beyond usernames and passwords.

Wal-Mart Plan Could Shake Up Bank Industry

Steven Oberbeck reports for the Salt Lake Tribune on Wal-Mart's plan to open an industrial bank in Utah.

Already there are rumblings in Congress that could make any Utah-based Wal-Mart Bank a short-lived financial institution. Last month, Rep. Jim Leach (R-Iowa) introduced legislation that would block commercial firms such as Wal-Mart from owning industrial banks and force those who already own them to get rid of their banks within five years. And that could impact the owners of at least a dozen industrial banks in Utah.
Leach's bill, the Financial Safety and Equity Act, was drafted in response to a recent GAO report (PDF) prepared at Leach's request examining Industrial Loan Companies.

October 17, 2005

Payments News Survey: Strong Authentication

We've just posted the first Payments News reader participation survey and want to encourage you to participate.

The heat in the already hot arena of strong authentication just went up a few degrees, when the FFIEC last week issued new guidance to U.S. banks urging consideration of it for internet banking.

There are a lot of products and solutions for stronger authentication in the marketplace. We'd like to hear your views - which ones appeal to you and your institution? Please take a few minutes to fill out this short survey and share your opinions.

We'll keep the survey open for about a week and will then post the un-scientific, but, we hope, interesting results right back here on Payments News!

eBay Limits Seller Payment Choices

AuctionBytes' Ina Steiner reports on a new eBay policy that limits seller payment choices - citing safety concerns about some payment methods.  The new eBay Safe Payments Policy also bans new online payment methods from being accepted - unless approved by eBay - and establishes certain criteria that any new online payment method must meet to be approved for use on eBay.


Pay By Touch To Acquire CardSystems Solutions

Pay By Touch has announced that it has agreed to acquire substantially all of the assets of CardSystems Solutions.

On Saturday, CyberSource has announced it had terminated negotiations with CardSystems, withdrawing its earlier offer to purchase the company's assets. CyberSource said its termination was the result of the inability of the parties to reach agreement in a timely manner creating severe obstacles to closing the transaction.

Eric Dash reports on the story for the New York Times.


Today's Headline News - Monday, October 17, 2005

Note: This posting is updated regularly throughout the day.

October 16, 2005

Bankers Oppose Wal-Mart as Rival

Michael Barbaro reports for the New York Times on concerns about Wal-Mart's plans to enter banking.

A coalition has formed to keep Wal-Mart out of banking and includes the Independent Community Bankers of America (which provided a sample letter for its members to send to the F.D.I.C.), the National Grocers Association, the National Association of Convenience Stores and the United Food and Commercial Workers union, which is trying unionize Wal-Mart workers. A coalition of community groups called Wal-Mart Watch has sent a petition to the F.D.I.C. with 11,000 signatures opposing Wal-Mart's application.


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