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June 09, 2006

The Interchange Fee Debate: Issues and Economics

James M. Lyon, First Vice President of the Federal Reserve Bank of Minneapolis, gave a presentation to the Minneapolis Fed's board of directors on Jan. 19, 2006 about bank card interchange fees. An article based on his presentation titled "The Interchange Fee Debate: Issues and Economics" is now available on the Minneapolis Fed's web site.

Lyon concludes: "The Fed, clearly, has no jurisdiction in this dispute and will not be intervening as either side would wish. Undoubtedly, the matter will play out in the courts for many years to come. But the academic research to date indicates that both parties will have a difficult time establishing a clear picture of the credit and debit card market, and the economics thereof."

Annals of Card Economics: Citi's Migration to Business Cards

A friend writes: "I recently received a letter from Citibank telling me they're replacing my existing Citi Diamond Preferred Rewards card with a CitiBusiness card? Among other things, they're reissuing my card with a new account number. What's this all about?"

We can only speculate about the reasons behind Citi's replacement - and our speculation is that this reissuance is all about card interchange economics. Cards classified as business cards have historically had higher interchange fees associated with them - paid to the issuer by merchants - primarily because to get issuance the card associations had to make the cards economically viable for issuers who wouldn't typically be receiving any significant revolving interest income from such cards. In today's rewards-oriented environment, higher interchange fees to the issuer are the power behind the funding of rewards programs for cardholders. So, who loses? Merchants lose -- because of the higher fees they'll be paying on those new business card transactions.

More Speculation About GBuy

Red Herring writes about an analyst's comments today speculating that Google will unveil a new online payment service called GBuy later this month. The article says that the analyst, RBC's Jordan Rohan, believes that the service will identify those merchants who accept GBuy payments on Google's search result pages, implying higher trust and presumably driving more clickthru's to those merchants.

eBay and Google: A Coopetition Perspective

John Battelle blogs about an interesting analysis of eBay and Google written by Julien Decot and Steve Lee, two Haas School of Business MBAs at Cal Berkeley. In his blog post, Battelle links to the paper, titled "eBay and Google: A Coopetition Perspective". Interestingly, Battelle comments that, after graduation, the two authors are going to work in Silicon Valley - one for eBay and the other for ... Google.

Alternative Payments Are Gaining Online, But...

Digital Transactions takes a look at adoption of alternative payment methods by ecommerce merchants - and some of the issues involved. "Of all the payment methods I had grandiose plans of implementing six months ago when Internet Retailer asked me to speak, I’ve implemented none,” said one retailer.

The Merchant-Bank Struggle for Control of Payment Systems

The Journal of Financial Transformation's September 2006 issue contains an article by Adam Levitin - an attorney in Wilmington, Delaware - titled "The Merchant-Bank Struggle for Control of Payment Systems" (PDF). His conclusion: "The ultimate outcomes of these developments are uncertain, but one thing is not: the payments industry will look very different in a decade."

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A Look Inside An ISO: Innovative Payment Solutions

Justin McElroy of The Ironton (Ohio) Tribune writes about Innovative Payment Solutions, a local independent sales organization (ISO) selling bank card acceptance services to merchants.

Barclaycard Flexi-Rate Encourages Cardholders to Repay More

Barclays has announced that its Barclaycard Flexi-Rate customers are repaying credit card balances more quickly – reducing the time taken to repay and the amount of interest they pay. Flexi-Rate charges a lower interest rate to those customers who pay off a higher proportion of their balance. Customers who pay more than 10% of their monthly balance are charged an interest rate of 9.9%, those who pay more than 5% are charged 12.9%. Customers who opt to pay less than 5% (minimum 2%) are charged 16.9%.

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Biometric Authentication Gains Momentum

A new research report by Mercator Advisory Group predicts that the market for biometrics will approach $7 billion By 2010, explores the market opportunities for payments-related biometric authentication and reviews the various biometric scanning technologies available.

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Is Your Credit Being Hacked?

Dayana Yochim writes for The Motley Fool how "credit fraud is like a poison gas -- nearly undetectable until after the debilitating effects have begun to take hold" - and what to do about it including outlining seven signs that your credit may be under attack.

Credit Cards Go To The Dogs, Cats

Hill's Pet Nutrition has announced it is partnering with Bank of America to launch the PetRewards VISA credit card that pays rewards to both pet owners and veterinary health care team members. Consumers may customize their card with their pet's picture by sending in the picture by mail or submitting a digital photo online or they may choose from three existing card designs.

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Major Japanese Banks Introducing Biometric ATMs

Asahi Shimbun reports that threee of Japan's megabanks are introducing biometric identification into their automated teller machines, but depositors are largely shunning the systems despite enhanced security. The Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp. and Mizuho Bank plan to install ATMs with biometric recognition functions at all their staffed branches by September.

ILCs Scrutinized

Steven Oberbeck writes for The Salt Lake Tribune about a move by 98 members of Congress who asked the Federal Deposit Insurance Corp. yesterday to impose a moratorium on issuing deposit insurance for any industrial bank owned by a commercial company while Congress considers the future of industrial loan corporations. The request is the latest move by opponents of Wal-Mart's application for an ILC in Utah and for FDIC approval of that ILC.

June 08, 2006

American Express Launches Restaurant Partnership Program

American Express has announced a Restaurant Partnership Program that that company says is "designed to provide restaurateurs with a one-stop location for many of the savings and benefits available to merchants who accept the American Express Card."

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Barclays Bank, TRANSFIRST Announce Strategic Partnership

Barclays Bank and TRANSFIRST have announced a strategic partnership to provide U.S. merchants with processing solutions for worldwide payment transactions with TRANSFIRST becoming a registered International Service Organisation/Member Service Provider of Barclays Bank. These services will allow U.S. merchants to accept payment in Europe, in their international customers' currency of choice while receiving U.S. dollars for payment.

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Consumer Borrowing Up Sharply In April

Martin Crutsinger reports for the Associated Press on yesterday's consumer credit figures for April from the Federal Reserve. "For April, consumer borrowing on credit cards and other types of revolving loans rose at an annual rate of 4.5 percent after having fallen by 2.3 percent in March."

UK's Logic Group Introduces Logic Blog

Richard Ridge writes to tell us that the UK's Logic Group, the largest card processing provider in the UK, has launched a new weblog to discuss topics such as gift cards, managed services and PCI.

First Data Files For Western Union Spin-Off

First Data Corp. has announced that Western Union has filed a Form 10 registration statement with the Securities and Exchange Commission in connection with the planned spin-off by First Data of the Western Union business.

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June 07, 2006

Ingenix, ID Analytics Alliance to Combat Health Care Fraud

Ingenix, a UnitedHealth Group company, and ID Analytics have announced a strategic alliance to offer new solutions for health care fraud and abuse detection. The companies will develop advanced technologies to detect fraudulent and erroneous health care claims.

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Bank of America Hits Major Check Imaging Milestone

Bank of America announced today that it reached 5 million items exchanged via image in a single day.

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MasterCard, Fraternal Order of Police Hold Security Seminars

MasterCard has announced it is partnering with the Fraternal Order of Police to deliver a "multifaceted program to educate business owners about how to stop fraud before it happens, protect cardholder data and deliver peace of mind to their customers. The program is aimed at furthering collaboration on data security throughout the payment system and helping merchants keep cardholder data safe and secure."

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SVPCO Check Image Exchange May Volume Jumps 44%

SVPCO-Electronic Clearing Services has announced that the number of monthly items in May grew 44.4% to an all-time high of 50.8 million.

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Wallet365 - India's First eWallet

India's Times of Money has introduced Wallet365.com, a person-to-person payment service for consumers in India that "lets you pay anyone, anywhere" via email. As with PayPal, Wallet365 emphasizes safety, saying "it secures you from the dangers of online credit card fraud." Funds can be loaded into the account from participating banks for free (except ICICI which is charging a 2% fee) or from a credit card for a 2% fee. Fees also apply for sending money and paying bills but not for receiving money from others.

Identity 2006 Conference on Identity Risk Management

ID Analytics has announced that Identity 2006 will be held September 18-21, 2006 in Dana Point, California at the St. Regis Monarch Beach Resort & Spa. The fifth annual event, which brings together experts at the forefront of identity fraud detection and prevention to focus on the next level of Identity Risk Management: Bridging Networks of Trust.

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UK: Barclaycard Flexi-Rate Encourages Cardholders To Repay More

Figures released today show that Barclaycard Flexi-Rate customers are repaying credit card balances more quickly – reducing the time taken to repay and the amount of interest they pay

Bank of America Pilots Program to Reimburse Associates $3,000 for Purchase of Hybrid Vehicle

Bank of America has announced that, as part of a pilot program, it will reimburse $3,000 to associates purchasing a new hybrid vehicle. The program will be available to more than 21,000 associates living within 90 miles of Boston, Charlotte, and Los Angeles.

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Visa Latin America Debit and Prepaid Grows Over 50 percent

Consumers in Latin America and the Caribbean prefer Visa's debit and prepaid products over cash and checks as
demonstrated by annual purchase volume growth rates of more than 50 percent for the past four consecutive quarters. Visa Latin America's purchase volume totaled US$30 billion with a 52 percent increase for the year ending March 2006. Debit grew 51 percent with 150 million cards. In addition, prepaid products experienced an increase of 100 percent and reached 3.3 million cards.

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June 06, 2006

Deloitte's Global Financial Services Industry Outlook

Deloitte has posted a new Global Financial Services Industry Outlook (PDF) that explores the world of financial services in 2010. An accompanying 15 minute podcast (MP3) by Jack Ribeiro, Global Managing Partner for Deloitte’s Financial Services Industry practice, is also available online.

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On the Road to Payment System Convergence: Where Are We?

Glenbrook's Jim Salters shares a perspective on the reality of payments convergence based upon his recent discussions with senior executives from CheckFree and ACI Worldwide.

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